AbitibiBowater attracts needed financing

This transaction, which is part of the company's previously announced US$1.4-billion refinancing plan, is expected to address upcoming debt maturities and general liquidity needs of its Abitibi-Consolidated Inc. subsidiary. There is no financing condition to the obligations of Fairfax to fund the transaction.

The transaction, which is scheduled to close on March 31, 2008, is subject to certain conditions, including the receipt of various lender consents and the closing of the other components of the company's US$1.4-billion refinancing plan.

The US$350-million of convertible debentures is convertible into AbitibiBowater common shares at US$10 per share, carries an eight per cent cash coupon, has an ability for the company to pay interest in the form of additional "pay-in-kind" debentures at a rate of 10 per cent, and has a subsidiary guarantee. The debentures have a maturity of five years and are non-callable.

Under the Fairfax Purchase Agreement, Fairfax will have the right to appoint two directors to the Board of Directors of the Company.

In connection with the approval of the Fairfax transaction by the Board of Directors of AbitibiBowater, and pursuant to an exception provided by the New York Stock Exchange stockholder approval policy, the Audit Committee of AbitibiBowater determined that a delay in the transaction in order to secure stockholder approval of the issuance of the convertible debentures, given the pending maturities of Abitibi-Consolidated's April 1 and June 20, 2008 senior notes, as well as the current state of the credit and capital markets, could seriously jeopardize the financial viability of AbitibiBowater.

Accordingly, AbitibiBowater's Board of Directors and Audit Committee expressly approved the company's decision not to seek stockholder approval of the issuance of the convertible debentures to Fairfax. The New York Stock Exchange has accepted AbitibiBowater's reliance on the exception and the company, in reliance upon this exception, is mailing a letter to all stockholders notifying them of its intention to issue the convertible debentures without their prior approval.

This press release is neither an offer to purchase nor a solicitation of an offer to sell any securities. The convertible debentures have not been and may not be registered under the Securities Act of 1933 and, as such, may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

AbitibiBowater produces a wide range of newsprint, commercial printing papers, market pulp and wood products. It is the eighth largest publicly traded pulp and paper manufacturer in the world. Following the required divestiture agreed to with the U.S. Department of Justice, AbitibiBowater will own or operate 27 pulp and paper facilities, including one in Brooklyn, Queens County and 35 wood products facilities located in the United States, Canada, the United Kingdom and South Korea.

Marketing its products in more than 90 countries, AbitibiBowater is also among the world's largest recyclers of newspapers and magazines, and has more third-party certified sustainable forest land than any other company in the world. AbitibiBowater's shares trade under the stock symbol ABH on both the New York Stock Exchange and the Toronto Stock Exchange.

Fairfax Financial Holdings Limited is a financial services holding company, which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management.