As filed with the Securities and Exchange Commission on August 22, 2003.
Registration No. 333-_______.
--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
BOWATER INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 2621 62-0721803
(State or Other Juris- (Primary Standard Industrial (I.R.S. Employer
diction of Incorporation Classification Code Number) Identification Number)
or Organization
55 E. CAMPERDOWN WAY (29601), P. O. BOX 1028,
GREENVILLE, SOUTH CAROLINA 29602-1028
(864) 271-7733 (Address, Including Zip Code,
and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
HARRY F. GEAIR Copies to:
VICE PRESIDENT - GENERAL COUNSEL AND SECRETARY JO WATSON HACKL, ESQ.
55 E. CAMPERDOWN WAY (29601), P. O. BOX 1028, WYCHE, BURGESS, FREEMAN & PARHAM, P.A.
GREENVILLE, SOUTH CAROLINA 29602-1028 44 E. CAMPERDOWN WAY (29601), P.O. BOX 728
(864) 282-9352 GREENVILLE, SOUTH CAROLINA 29602-0728
(Name, Address, Including Zip Code, and Telephone (864) 242-8225
Number, Including Area Code, of Agent for Service)
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the Securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
--------------------------- ---------------------- ---------------------- ---------------------- ---------------------
TITLE OF EACH PROPOSED PROPOSED
CLASS OF MAXIMUM MAXIMUM
SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT (1) PRICE (1) FEE
--------------------------- ---------------------- ---------------------- ---------------------- ---------------------
6.5% Notes due 2013 $400,000,000 100% $400,000,000 $32,360
--------------------------- ---------------------- ---------------------- ---------------------- ---------------------
(1) Estimated pursuant to Rule 457(f) solely for the purpose of calculating the
registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
[THIS PAGE INTENTIONALLY LEFT BLANK]
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED AUGUST [__], 2003
--------------------------------------------------------------------------------
$400,000,000
[BOWATER LOGO OMITTED]
BOWATER INCORPORATED
Offer to Exchange Outstanding 6 1/2% Notes due 2013
For 6 1/2% Notes due 2013 which have been registered under the Securities Act of
1933
--------------------------------------------------------------------------------
THE EXCHANGE OFFER
>> We issued $400,000,000 in aggregate principal amount of our 6 1/2% Notes
due 2013 on June 19, 2003, which we call the ORIGINAL NOTES.
>> We will exchange all outstanding original notes that are validly tendered
and not validly withdrawn, for an equal principal amount of 6 1/2% Notes
due 2013 that are subject to this prospectus and that are freely tradeable,
which we call the EXCHANGE NOTES. In this prospectus we sometimes refer to
the original notes and the exchange notes collectively as the NOTES.
>> The exchange offer expires at 5:00 p.m., New York City time, on September
___, 2003, unless we extend it. We do not currently intend to extend the
expiration date.
>> Our completion of the exchange offer is subject to customary conditions,
which we may waive.
>> You may withdraw tenders of outstanding original notes at any time prior to
the expiration of the exchange offer.
>> The exchange of original notes for exchange notes in the exchange offer
will not be a taxable event for U.S. federal income tax purposes.
>> We will not receive any proceeds from the exchange offer.
THE EXCHANGE NOTES
>> We are making the exchange offer because we are required to do so by a
registration rights agreement between us and the initial purchasers of the
original notes that we entered into in connection with the private
placement of the original notes.
>> The terms of the exchange notes are substantially identical to the terms of
the original notes except that the exchange notes are registered under the
Securities Act of 1933, as amended, will be freely tradeable and, with
limited exceptions, will not have registration rights.
>> We will pay interest on the notes semi-annually in arrears on June 15 and
December 15 of each year, starting on December 15, 2003. The notes will
mature on June 15, 2013.
>> We may redeem the notes at a price equal to their principal amount plus a
make-whole premium, together with accrued but unpaid interest.
>> The notes are unsecured obligations, and rank equally with all of our
existing and future senior unsecured debt. The notes rank senior to any of
our debt that may be expressly subordinated to the notes but are
effectively subordinated to all of our senior secured indebtedness to the
extent of the assets securing that indebtedness and to all the obligations
and liabilities of our subsidiaries to the extent of their assets.
RESALES OF THE EXCHANGE NOTES
>> The exchange notes may be sold in the over the counter market, in
negotiated transactions or through a combination of these methods.
>> There is currently no public market for the exchange notes, and there can
be no assurance that a public market for the exchange notes will develop.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 9 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS DATED AUGUST , 2003.
WHERE YOU CAN FIND MORE INFORMATION ABOUT BOWATER INCORPORATED
Bowater Incorporated files annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission,
which we refer to as the SEC. Its SEC filings are available over the Internet at
the SEC's website at http://www.sec.gov and through Bowater Incorporated's
website (http://www.bowater.com).
You may also obtain copies of the documents at prescribed rates by writing to
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call 1-800-SEC-0330 for further information on the operations
of the public reference facilities. Bowater's SEC filings are also available at
the office of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
WE "INCORPORATE BY REFERENCE" IN THIS PROSPECTUS CERTAIN INFORMATION FILED BY
BOWATER INCORPORATED WITH THE SEC, WHICH MEANS THAT WE DISCLOSE IMPORTANT
BUSINESS AND FINANCIAL INFORMATION TO YOU BY REFERRING TO THOSE DOCUMENTS. THOSE
DOCUMENTS ARE NOT INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS. THE INFORMATION
INCORPORATED BY REFERENCE IS AN IMPORTANT PART OF THIS PROSPECTUS, AND
INFORMATION THAT BOWATER INCORPORATED SUBSEQUENTLY FILES WITH THE SEC WILL
AUTOMATICALLY UPDATE AND SUPERSEDE THE INFORMATION IN THIS PROSPECTUS AND IN
BOWATER INCORPORATED'S OTHER FILINGS WITH THE SEC.
We incorporate by reference the documents listed below, which Bowater
Incorporated has already filed with the SEC, and any future filings Bowater
Incorporated makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act (other than information furnished under Item 9 or Item
12 of Form 8-K) until the offering described in this prospectus is completed:
>> Bowater Incorporated's Annual Report on Form 10-K for the year ended December
31, 2002;
>> Bowater Incorporated's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2003;
>> Bowater Incorporated's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2003;
>> Bowater Incorporated's Current Report on Form 8-K filed on June 12, 2003; and
>> Bowater Incorporated's Current Report on Form 8-K filed on June 17, 2003.
This information is available without charge upon written or oral request. You
may request this information by writing to Bowater Incorporated at Post Office
Box 1028, Greenville, South Carolina 29602-1028 (Attention: Investor Relations
Department) or by calling (864) 282-9430.
TO OBTAIN TIMELY DELIVERY OF INFORMATION REQUESTED, YOU MUST MAKE YOUR REQUEST
NO LATER THAN FIVE BUSINESS DAYS BEFORE THE DATE ON WHICH YOU MUST MAKE YOUR
INVESTMENT DECISION. THE EXCHANGE OFFER WILL EXPIRE ON SEPTEMBER , 2003, UNLESS
EXTENDED.
IMPORTANT NOTICE TO READERS
No person is authorized to give any information or to make any representation
not contained in this prospectus (including information expressly incorporated
in this prospectus by reference) in connection with this offering. If given or
made, you should not rely on such information or representations as having been
authorized by us. This prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the notes in any jurisdiction where, or to any
person to whom, it is unlawful to make such offer or solicitation. Neither the
delivery of this prospectus nor any sale made under it shall, under any
circumstances, create any implication that there has been no change in the
information set forth in this prospectus or in our affairs since the date of
this prospectus.
Each holder of original notes seeking to exchange original notes for exchange
notes must comply with all applicable laws and regulations in force in any
jurisdiction in which it engages in such exchange and in which it thereafter
purchases, offers or sells any of the notes and must obtain any consent,
ii
approval or permission required of it for the exchange or the purchase, offer or
sale by it of any of the notes under the laws and regulations in force in any
jurisdiction to which it is subject or in which it makes such exchange or
purchases, offers or sales, and we shall not have any responsibility for such
matters.
The information contained in this prospectus has been provided by us and by
other sources. We believe, but cannot assure you, that information provided by
other sources is accurate and complete. We also cannot assure you that an
investment in our securities is appropriate for your particular circumstances.
In making an investment decision, you must rely on your own examination of our
company and the terms of this offering, including the merits and risks involved.
The contents of this prospectus are not to be construed as legal, business or
tax advice. You should consult your own attorneys, business advisors and tax
advisors as to legal, business or tax advice.
This prospectus contains summaries intended to be accurate with respect to
certain terms of certain documents, but we refer you to the actual documents,
which will be made available to prospective investors upon request to us, for
complete information with respect to these documents, and all the summaries are
qualified in their entirety by such reference.
If you are a broker-dealer and you received exchange notes for your own account,
you must acknowledge that you will deliver a prospectus in connection with any
resale of such exchange notes. We believe that by making such acknowledgement,
you will not be deemed to admit that you are an "underwriter" under the
Securities Act of 1933.
Broker-dealers may use this prospectus in connection with any resale of exchange
notes received in exchange for original notes where such original notes were
acquired by the broker-dealer as a result of market-making activities or trading
activities. We will make this prospectus, as amended or supplemented, available
to any broker dealer for use in any such resale for a period of up to 180 days
after the date of this prospectus (subject to extension in certain
circumstances). A broker-dealer may not participate in the exchange offer with
respect to outstanding notes acquired other than as a result of market-making
activities or trading activities.
FORWARD-LOOKING STATEMENTS
Statements that are not reported financial results or other historical
information are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. This prospectus, each of Bowater's
annual reports to shareholders, Forms 10-K, 10-Q and 8-K, proxy statements,
prospectuses and any other written or oral statement made by us or on our behalf
previously or in the future may include forward-looking statements including,
for example, statements about our business outlook, assessment of market
conditions, strategies, future plans, future sales, prices for our major
products, inventory levels, capital spending and tax and exchange rates. These
forward-looking statements are not guarantees of future performance. For these
statements we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
These statements are based on management's expectations that involve a number of
business risks and uncertainties, any of which could cause actual results to
differ materially from those expressed in or implied by the forward-looking
statements. In addition to specific factors described in connection with any
particular forward-looking statement, factors that could cause actual results to
differ materially include, but are not limited to, those in the "Risk Factors"
section. Other risks besides those listed in the section entitled "Risk Factors"
also could adversely affect us. We disclaim any obligation to publicly update or
revise any forward-looking statements.
MARKET SHARE AND INDUSTRY DATA
Market share data and other statistical industry information used throughout
this prospectus and the documents incorporated into this prospectus by reference
are based on independent industry publications, government publications, reports
by market research firms or other published independent sources. Some data are
also based on our good faith estimates, which are derived from our review of
internal surveys, as well as the independent sources listed above. Although we
believe these sources are reliable, we have not independently verified the
information and cannot guarantee its accuracy and completeness.
iii
PROSPECTUS SUMMARY
The following summary contains basic information about this offering. It likely
does not contain all the information that is important to you. For a more
complete understanding of this offering, we encourage you to read this entire
document and the documents incorporated by reference into this prospectus. As
used in this prospectus, unless the context indicates otherwise, "Bowater,"
"we," "our" and "us" refer collectively to Bowater Incorporated, the issuer of
the notes, together with its consolidated subsidiaries (and "Bowater
Incorporated" refers to the parent company only), except that in the
"Description of Exchange Notes" section, references to "we," "our" and "us"
refer solely to Bowater Incorporated and not its subsidiaries.
THE COMPANY
We are a leading producer of newsprint and coated groundwood papers. In
addition, we make uncoated groundwood papers, bleached kraft pulp and lumber
products. We operate facilities in the United States, Canada and South Korea and
our operations are supported by approximately 1.4 million acres of timberlands
owned or leased in the United States and Canada and approximately 32 million
acres of timber cutting rights in Canada. We market and distribute our products
throughout the world. No single customer, related or otherwise, accounted for
10% or more of our 2002 consolidated sales.
We completed our acquisition of Alliance Forest Products Inc. ("Alliance") on
September 24, 2001. The results of Alliance's operations have been included in
our consolidated financial statements since then. Before the acquisition,
Alliance was an integrated company specializing in timber harvesting and forest
management, as well as the production and sale of newsprint, uncoated specialty
paper, pulp, lumber and related products. Alliance had operations in Canada and
the United States. The acquisition added modern, low-cost supercalendered and
specialty paper production at Donnacona and Dolbeau, Quebec, enabling Bowater to
offer a full spectrum of groundwood paper grades. Alliance's extensive sawmill
system and approximately 18 million acres of cutting rights support Bowater's
expanded operations. Also, a strategically located mill in Coosa Pines, Alabama,
which produces market fluff pulp and newsprint and was modernized in the first
quarter of 2002 to produce 100% recycled fiber newsprint, enhances Bowater's
customer service capabilities. Bowater was incorporated in Delaware in 1964. Our
principal executive offices are located at 55 East Camperdown Way, Greenville,
South Carolina 29601. Our mailing address is Post Office Box 1028, Greenville,
South Carolina 29602-1028, and our telephone number at that address is (864)
271-7733.
1
THE EXCHANGE OFFER
On June 19, 2003, we completed a private offering of the original notes. In
connection with the offering of the original notes, we entered into a
registration rights agreement dated June 19, 2003 with the initial purchasers of
the original notes, which we call the Registration Rights Agreement. Under the
Registration Rights Agreement, we agreed to:
>> conduct the exchange offer described in this prospectus;
>> use our reasonable best efforts to cause the registration statement
containing this prospectus to be declared effective by the SEC by December
16, 2003; and
>> complete the exchange offer within 45 days of the effective date of the
registration statement.
In the exchange offer, you are entitled to exchange your original notes for
exchange notes. The terms of the exchange notes are substantially identical to
the terms of the original notes except that the exchange notes are registered
under the Securities Act of 1933, as amended (which we refer to as the
Securities Act), will be freely tradeable and, with limited exceptions, will not
have registration rights. You should read the description under the heading "The
Exchange Offer" beginning on page 19 and the heading "Description of the
Exchange Notes" beginning on page 31 for further information about the exchange
notes. After the exchange offer is completed, you will no longer be entitled to
any exchange rights or, with limited exceptions, registration rights for your
original notes or the exchange notes.
The exchange offer...................... We are offering to exchange
$1,000 principal amount of our
exchange notes for each $1,000
principal amount of original
notes. As of the date of this
prospectus, $400 million in
aggregate principal amount of
original notes is outstanding.
We have registered the exchange
notes under the Securities Act
and they are substantially
identical to the original notes,
except for the elimination of
some transfer restrictions,
registration rights and
liquidated damages provisions
relating to the original notes.
Accrued interest on the exchange......... Interest on the exchange notes
notes and the original notes will accrue from the last
interest payment date on which
interest was paid on the original
notes or, if no interest was paid
on the original notes, from the
date of issuance of the original
notes, which was June 19, 2003.
Holders whose original notes are
accepted for exchange will be
deemed to have waived the right
to receive any interest accrued
on the original notes.
No minimum condition.................... We are not conditioning the
exchange offer on the tender of
any minimum principal amount of
original notes.
Expiration date......................... The exchange offer will expire at
5:00 p.m., New York City time, on
September , 2003, unless we
extend it.
Withdrawal rights....................... You may withdraw your tender at
any time prior to 5:00 p.m., New
York City time, on the expiration
date.
Conditions to the exchange offer........ The exchange offer is subject to
customary conditions, which we
may waive. We currently
anticipate that each of the
conditions will be satisfied and
that we will not need to waive
any conditions. We reserve the
right to terminate or amend the
exchange offer at any time before
the expiration date if any such
condition occurs. For additional
information, see the subsection
entitled "The Exchange Offer--
Conditions to the Exchange
Offer."
2
Procedures for tendering................ If you are a holder of original
original notes notes, and you wish to accept the
exchange offer, you must:
>> complete, sign and date the
accompanying letter of
transmittal, or a facsimile
of the letter of
transmittal, and mail or
otherwise deliver the
letter of transmittal,
together with your original
notes, to the exchange
agent at the address set
forth under the subsection
entitled "The Exchange
Offer--Exchange Agent"; or
>> arrange for The Depository
Trust Company to transmit
certain required
information, including an
agent's message forming
part of a book-entry
transfer in which you agree
to be bound by the terms of
the letter of transmittal,
to the exchange agent in
connection with a
book-entry transfer.
By tendering your original notes
in either manner, you will be
required to represent, among
other things, that:
>> you are not our "affiliate"
(as defined in Rule 405
under the Securities Act)
or, if you are our
affiliate, you will comply
with the registration and
prospectus delivery
requirements of the
Securities Act to the
extent applicable;
>> any exchange notes to be
received by you in the
exchange offer will be
acquired in the ordinary
course of your business;
>> you have no arrangement or
understanding with any
person to participate in
the distribution of the
exchange notes in violation
of the provisions of the
Securities Act; and
>> if you are not a broker-
dealer, you are not engaged
in, and do not intend to
engage in, a distribution
of exchange notes.
Special procedures for.................. If you beneficially own original
beneficial owners notes registered in the name of a
broker, dealer, commercial bank,
trust company or other nominee
and you wish to tender your
original notes in the exchange
offer, you should contact the
registered holder promptly and
instruct it to tender on your
behalf. If you wish to tender on
your own behalf, you must, prior
to completing and executing the
letter of transmittal and
delivering your original notes,
either arrange to have your
original notes registered in your
name or obtain a properly
completed bond power from the
registered holder. The transfer
of registered ownership may take
considerable time.
Guaranteed delivery procedures.......... If you wish to tender your
original notes and time will not
permit your required documents to
reach the exchange agent by the
expiration date, or the
procedures for book-entry
transfer cannot be completed on
time, you may tender your
original notes according to the
guaranteed delivery procedures
described in the subsection
entitled "The Exchange Offer--
Procedures for Tendering Original
Notes."
Acceptance of original notes and........ We will accept for exchange all
delivery of exchange notes original notes which are properly
tendered in the exchange offer
prior to 5:00 p.m., New York City
time, on the expiration date. The
exchange notes issued in the
exchange offer will be delivered
promptly following the expiration
date. For additional information,
3
see the subsection entitled "The
Exchange Offer--Acceptance of
Original Notes for Exchange;
Delivery of Exchange Notes."
Use of proceeds......................... We will not receive any proceeds
from the issuance of exchange
notes in the exchange offer. We
will pay for our expenses
relating to the exchange offer.
Federal income tax consequences......... The exchange of exchange notes
for original notes in the
exchange offer will not be a
taxable event for federal income
tax purposes. For additional
information, see the section
entitled "United States Federal
Income Tax Considerations."
Effect on holders of original notes..... Upon completion of the exchange
offer, we will have fulfilled a
covenant contained in the
Registration Rights Agreement. If
you do not tender your original
notes in the exchange offer:
>> you will continue to hold
the original notes and will
be entitled to all the
rights and limitations
applicable to the original
notes under the indenture
governing the notes, except
for any rights under the
Registration Rights
Agreement that terminate as
a result of the completion
of the exchange offer; and
>> you will not have any
further registration or
exchange rights and your
original notes will
continue to be subject to
restrictions on transfer.
Accordingly, the trading
market for untendered
original notes could be
adversely affected.
No appraisal or dissenters' rights...... You do not have any appraisal or
dissenters' rights in connection
with the exchange offer.
Exchange agent.......................... The Bank of New York is serving
as exchange agent in connection
with the exchange offer.
THE EXCHANGE NOTES
The summary below describes the principal terms of the notes. Some of the terms
and conditions described below are subject to important limitations and
exceptions. For a more detailed description of the exchange notes, see the
section entitled "Description of the Exchange Notes."
Issuer.................................. Bowater Incorporated
Total amount of exchange notes.......... $400,000,000 aggregate principal
offered amount of 6 1/2% Notes due 2013.
Maturity date........................... The exchange notes mature on June
15, 2013.
Redemption by us........................ We may redeem all or a portion of
the exchange notes from time to
time at a price equal to the
greater of:
>> 100% of the principal amount
thereof, or
>> the sum of the present value
of the principal amount and
interest on the exchange
notes being redeemed plus a
make-whole premium,
in either case, plus accrued and
unpaid interest to the redemption
date.
Interest rate and payment dates......... The exchange notes will accrue
4
interest from the date of their
issuance at the rate of 6 1/2%
per year. Interest on the
exchange notes will be payable
semi-annually in arrears on each
June 15 and December 15,
commencing on December 15, 2003.
Ranking................................. The exchange notes will be our
unsecured obligations.
The exchange notes will rank
equally with all of our existing
and future senior unsecured debt.
The exchange notes will rank
senior to any of our debt that
may be expressly subordinated to
the exchange notes, but will be
effectively subordinated to any
secured indebtedness to the
extent of the assets securing
that indebtedness and to all
obligations and liabilities of
our subsidiaries to the extent of
their assets. At June 30, 2003,
Bowater Incorporated had no
secured indebtedness on an
unconsolidated basis, and our
consolidated subsidiaries had
indebtedness to third parties of
approximately $1,172 million, of
which approximately $112 million
was secured and approximately
$598 million was guaranteed by
Bowater Incorporated. In
addition, our operating
subsidiaries have significant
current and long-term
liabilities. As of June 30, 2003,
Bowater Incorporated on an
unconsolidated basis had
approximately $1,251 million of
unsecured indebtedness and
approximately $455 million of
additional unsecured indebtedness
available to be borrowed under
its credit facilities.
Certain covenants....................... The indenture governing the
exchange notes restricts our
ability to create certain liens,
enter into sale and lease-back
transactions and merge or
consolidate.
Transferability; market................. The exchange notes will generally
be freely transferable but will
be a new issue of securities for
which there may not initially be
a market. Accordingly, there can
be no assurance as to the
development or liquidity of any
market for the exchange notes.
Use of net proceeds..................... We will not receive any cash
proceeds from the exchange offer.
Risk factors............................ See the section entitled "Risk
Factors" beginning on page 9 for
a discussion of factors you
should carefully consider before
deciding to invest in the notes
or participate in the exchange
offer.
5
SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth selected summary historical consolidated
financial information for each of the last five years and for the six-month
periods ended June 30, 2003 and 2002. The summary financial data as of and for
the five years ended December 31, 2002, under the captions "Income Statement
Data," and "Financial Position" shown below, have been derived from our audited
consolidated financial statements. The selected financial data presented below
as of and for the six-month periods ended June 30, 2003 and 2002 are derived
from our unaudited consolidated financial statements. In the opinion of our
management, all adjustments (consisting of normal recurring adjustments)
necessary for fair presentation of the unaudited consolidated financial
statements have been made. The results for the six months ended June 30, 2003
are not necessarily indicative of the results to be expected for the full year.
This table should be read in conjunction with our other financial information,
including "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements included in our 2002 Form
10-K and June 30, 2003 Form 10-Q incorporated by reference into this prospectus.
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------- -------------------
2002 2001(1) 2000(1) 1999(1) 1998(1) 2003 2002
---- ------- ------- ------- ------- ---- ----
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS AND RATIO DATA)
INCOME STATEMENT DATA
Sales ..................................... $2,581.1 $2,454.3 $2,500.3 $2,311.7 $2,142.7 $1,294.6 $1,271.0
Cost of sales, excluding depreciation,
amortization and cost of timber harvested 2,020.7 1,688.4 1,549.9 1,625.2 1,422.2 1,070.6 979.1
Depreciation, amortization and cost of
timber harvested........................ 340.5 321.3 295.2 300.2 229.6 168.5 172.4
Distribution costs ........................ 232.6 180.0 166.6 177.0 147.7 124.5 107.2
Selling and administrative expense ........ 140.2 114.5 132.6 98.7 82.6 70.8 75.9
Impairment of assets ...................... 28.5 -- -- 92.0 119.6 -- --
Net gain on sale of assets ................ 85.7 163.3 7.3 225.4 21.1 115.1 75.0
-------- -------- -------- -------- -------- -------- --------
Operating income (loss) ................... (95.7) 313.4 363.3 244.0 162.1 (24.7) 11.4
Interest income ........................... (4.5) (8.7) (15.6) (7.7) (17.5) (2.4) (2.2)
Interest expense, net of capitalized
interest................................ 163.0 141.0 135.2 126.7 98.4 82.1 83.1
Other, net ................................ (3.4) (8.0) 4.5 (30.8) 65.6 10.8 5.1
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
minority interests...................... (250.8) 189.1 239.2 155.8 15.6 (115.2) (74.6)
Provision for income tax expense (benefit). (100.5) 77.0 70.3 71.5 25.9 (12.7) (25.3)
Minority interests in net income of
subsidiaries............................ (7.9) 41.6 9.5 5.6 8.2 (7.2) (5.8)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before cumulative effect of
accounting change....................... (142.4) 70.5 159.4 78.7 (18.5) (95.3) (43.5)
Cumulative effect of accounting change..... -- -- -- -- -- (2.1) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) ......................... $ (142.4) $ 70.5 $ 159.4 $ 78.7 $ (18.5) $ (97.4) $ (43.5)
======== ======== ======== ======== ======== ======== ========
PRODUCT SALES INFORMATION
Newsprint(2) .............................. $1,199.2 $1,438.7 $1,421.5 $1,282.2 $1,108.8 $ 598.0 $ 581.6
Coated and specialty papers ............... 613.1 479.6 428.4 363.9 440.3 338.0 306.1
Directory paper ........................... -- -- -- 89.4 173.5 -- --
Market pulp ............................... 498.7 403.9 546.3 434.2 272.1 240.1 242.1
Lumber and other wood products ............ 270.1 132.1 104.1 142.0 148.0 118.5 141.2
-------- -------- -------- -------- -------- -------- --------
$2,581.1 $2,454.3 $2,500.3 $2,311.7 $2,142.7 $1,294.6 $1,271.0
======== ======== ======== ======== ======== ======== ========
6
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------ -----------------
2002 2001(1) 2000(1) 1999(1) 1998(1) 2003 2002
---- ------- ------- ------- ------- ---- ----
(IN MILLIONS, EXCEPT RATIO DATA)
FINANCIAL POSITION
Cash and cash equivalents ............ $ 35.9 $ 28.3 $ 20.0 $ 24.7 $ 58.3 $ 82.7 $ 29.7
Working capital ...................... (21.2) (173.9) (335.8) 134.7 (77.1) 302.0 85.9
Timber and timberlands ............... 212.0 243.3 265.2 283.2 472.8 188.2 214.9
Fixed assets, net .................... 3,645.6 3,802.8 2,981.1 2,581.3 2,885.2 3,603.1 3,722.0
Total assets ......................... 5,590.3 5,761.0 5,004.1 4,552.2 5,092.0 5,670.5 5,677.1
Long-term debt, including current
installments 2,121.7 1,901.0 1,446.1 1,490.1 1,620.8 2,310.7 2,129.9
Total debt ........................... 2,370.7 2,242.7 1,931.1 1,505.1 1,830.8 2,422.5 2,307.9
Total capitalization(3) .............. 4,198.3 4,349.9 3,851.8 3,397.4 3,736.6 4,232.6 4,376.7
ADDITIONAL INFORMATION
Total debt as a percentage of total
capitalization, excluding
revaluation of debt(4).............. 55.5% 50.4% 48.6% 42.1% 46.3% 56.3% 51.7%
Cash flow from operations ............ $ 41.2 $ 372.8 $ 416.6 $ 147.0 $ 274.1 $ 41.1 $ (23.8)
Cash invested in fixed assets, timber
and timberlands..................... 238.7 246.8 283.2 198.5 223.2 150.0 125.0
EBITDA(5) ............................ 256.1 601.1 644.5 569.4 317.9 138.1 184.5
Ratio of total debt to EBITDA(5) ..... 9.3x 3.7x 3.0x 2.6x 5.8x -- --
Ratio of EBITDA(5) to interest expense 1.6x 4.3x 4.8x 4.5x 3.2x 1.7x 2.2x
Ratio of earnings to fixed charges (6) (6) 2.1x 2.5x 2.0x 1.1x (6) (6)
---------------
(1) In 2001, we acquired Alliance Forest Products Inc. In 2000, we acquired
Newsprint South, Inc. In 1999, we sold Great Northern Paper, Inc. In 1998,
we acquired Avenor Inc. and a South Korean newsprint mill.
(2) Newsprint sales do not include shipments from Ponderay Newsprint Company,
an unconsolidated entity.
(3) Total capitalization includes total debt, minority interests in
subsidiaries and shareholders' equity.
(4) The calculation of total debt as a percentage of total capitalization,
excluding revaluation of debt, excludes both in the numerator and
denominator, revaluation of debt assumed through acquisitions, as defined
in our credit facilities agreements for the purpose of calculating a
required compliance ratio of total debt to total capitalization. Total debt
as a percentage of total capitalization is the most directly comparable
measure using generally accepted accounting principles (GAAP). A
reconciliation of the GAAP items to the calculation of total debt as a
percentage of total capitalization, excluding revaluation of debt, is as
follows:
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- -------------------
2002 2001(1) 2000(1) 1999(1) 1998(1) 2003 2002
---- ------- ------- ------- ------- ---- ----
(IN MILLIONS, EXCEPT PERCENTAGES)
Total debt ........................... $2,370.7 $2,242.7 $1,931.1 $1,505.1 $1,830.8 $2,422.5 $2,307.9
Less: Revaluation of debt ............ (94.1) (102.3) (113.2) (128.6) (190.6) (89.7) (97.8)
-------- -------- -------- -------- -------- -------- --------
2,276.6 2,140.4 1,817.9 1,376.5 1,640.2 2,332.8 2,210.1
Total capitalization ................. 4,198.3 4,349.9 3,851.8 3,397.4 3,736.6 4,232.6 4,376.7
Less: Revaluation of debt ............ (94.1) (102.3) (113.2) (128.6) (190.6) (89.7) (97.8)
-------- -------- -------- -------- -------- -------- --------
4,104.2 4,247.6 3,738.6 3,268.8 3,546.0 4,142.9 4,278.9
Total debt as a percentage of total
capitalization, excluding
revaluation of debt ................ 55.5% 50.4% 48.6% 42.1% 46.3% 56.3% 51.7%
======== ======== ======== ======== ======== ======== ========
Total debt as a percentage of total
capitalization, in accordance with
GAAP ............................... 56.5% 51.6% 50.1% 44.3% 49.0% 57.2% 52.7%
======== ======== ======== ======== ======== ======== ========
(5) EBITDA represents earnings (loss) before interest, taxes and depreciation,
amortization and the cost of timber harvested. EBITDA is not a presentation
made in accordance with GAAP and should not be considered an alternative
measure of operating income or to cash flows from operating activities as
determined in accordance with GAAP. EBITDA is included because we believe
it is a widely accepted indicator of our ability to service our debt and
make capital expenditures. EBITDA as presented herein may not be comparable
to similarly titled measures reported by other companies.
7
A reconciliation of the financial statement line items reported under GAAP
to the non-GAAP measure EBITDA is presented below.
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------- ------------------
2002 2001(1) 2000(1) 1999(1) 1998(1) 2003 2002
---- ------- ------- ------- ------- ---- ----
(IN MILLIONS)
Financial statement line items as reported under GAAP:
Net income (loss) ......................... $(142.4) $ 70.5 $159.4 $ 78.7 $ (18.5) $(97.4) $(43.5)
Provision for income tax expense (benefit) (100.5) 77.0 70.3 71.5 25.9 (12.7) (25.3)
Interest expense, net of capitalized 163.0 141.0 135.2 126.7 98.4 82.1 83.1
interest ..............................
Interest income ........................... (4.5) (8.7) (15.6) (7.7) (17.5) (2.4) (2.2)
Depreciation, amortization and cost of
timber
harvested ............................. 340.5 321.3 295.2 300.2 229.6 168.5 172.4
------- ------ ------ ------ ------- ------ ------
EBITDA..................................... $ 256.1 $601.1 $644.5 $569.4 $ 317.9 $138.1 $184.5
======= ====== ====== ====== ======= ====== ======
(6) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. Earnings consist of income before income taxes and minority
interests plus interest expense (excluding interest capitalized during the
period and amortization of previously capitalized interest) plus the
portion of rental expenses representative of the interest factor. Fixed
charges consist of total interest expense (including interest capitalized
during the period) plus the portion of rental expense representative of the
interest factor plus amortized premium and discount related to
indebtedness. In fiscal year 2002 and the six month periods ended June 30,
2003 and 2002, fixed charges exceeded earnings by $259.5 million, $120.9
million and $78.0 million, respectively.
8
RISK FACTORS
Before making an investment in the notes or participating in the exchange offer,
you should carefully consider the following risk factors as well as the other
information contained in or incorporated by reference into this prospectus. The
risks described below are not the only risks facing our company. Additional
risks not presently known to us or which we currently consider immaterial also
may adversely affect our company and your investment. If any of these risks or
uncertainties actually occurs, our business, financial condition and operating
results could be materially adversely affected.
RISKS RELATED TO OUR BUSINESS
INDUSTRY CONDITIONS MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Our operating results reflect the cyclical pattern of the forest products
industry. Most of our products are world-traded commodity products. Prices for
our products have been historically volatile, and we, like other participants in
the forest products industry, have limited direct influence over the timing and
extent of price changes for our products. Instead, these price changes depend
primarily on industry supply and customer demand. Industry supply depends
primarily on available manufacturing capacity, and customer demand depends on a
variety of factors, including the health of the economy in general and the
strength of both print media advertising and new home construction. The United
States and global economy and the market for our products have weakened
significantly over the past several years, and market conditions continue to be
challenging. In addition, the long-term demand for newsprint in the United
States is not expected to grow appreciably.
INTENSE COMPETITION IN THE FOREST PRODUCTS INDUSTRY COULD ADVERSELY AFFECT OUR
OPERATING RESULTS AND FINANCIAL CONDITION
The markets for our products are all highly competitive. Actions by competitors
can affect our ability to sell our products and can affect the prices at which
our products are sold. Our industry is capital intensive, which leads to high
fixed costs. Some of our competitors may be lower-cost producers in some of the
businesses in which we operate, and accordingly these competitors may be less
adversely affected than us by price declines.
DEVELOPMENTS IN ELECTRONIC DATA TRANSMISSION AND STORAGE COULD ADVERSELY AFFECT
THE DEMAND FOR OUR PRODUCTS
Our newspaper, magazine and catalog publishing customers increasingly may use,
and compete with businesses that use, electronic data transmission and storage
instead of newsprint, coated paper, uncoated specialty papers or other products
made by us. We cannot predict the timing or extent of this trend.
CHANGES IN LAWS AND REGULATIONS COULD REQUIRE SUBSTANTIAL ADDITIONAL
EXPENDITURES BY US TO COMPLY WITH THESE LAWS AND REGULATIONS
We are subject to a variety of foreign, federal, state and local laws and
regulations dealing with trade, transportation, currency controls and the
environment. Changes in, or more stringent enforcement of, these laws or
regulations have required in the past, and could require in the future,
substantial expenditures by us. For example, changes in environmental laws and
regulations could require us to spend substantial amounts to comply with
restrictions on air emissions, wastewater discharge, waste management and
landfill sites, including remediation costs. Environmental laws are becoming
increasingly more stringent. Consequently, our compliance and remediation costs
could increase materially. For example, in April 1998, the Environmental
Protection Agency promulgated new air and water quality standards for the paper
industry, known as the Cluster Rule, aimed at further reductions of pollutants.
We anticipate spending approximately $175 million by the end of 2003, of which
approximately $152 million had been spent as of June 30, 2003, to enable our
Catawba, South Carolina facility to comply with the Cluster Rule. Another
example is duties imposed on lumber shipments from Canada into the United States
as discussed in the section entitled "Results of Operations - Three Months Ended
June 30, 2003, versus June 30, 2002 - Product Line Information - Lumber" in our
June 30, 2003 Form 10-Q.
9
WE MAY BE SUBJECT TO UNFORESEEN ENVIRONMENTAL LIABILITIES
As an owner and operator of real estate and manufacturing and processing
facilities, we may be liable under environmental laws for cleanup and other
costs and damages, including tort liability and damages to natural resources,
resulting from past or present spills or releases of hazardous or toxic
substances on or from our current or former properties. We may incur liability
under these laws without regard to whether we knew of, were responsible for or
owned the property at the time of any spill or release of hazardous or toxic
substances on or from our property, or at properties where we arranged for the
disposal of regulated materials. Claims may arise out of currently unknown
environmental conditions or aggressive enforcement efforts by governmental or
private parties.
WE ARE EXPOSED TO CURRENCY FLUCTUATIONS
Changes in foreign currency exchange rates can affect our selling prices and
manufacturing costs.
We compete with North American, European and Asian producers in most of our
product lines. Our products are sold and denominated in both U.S. dollars and
selected foreign currencies. In addition to the impact of product supply and
demand, changes in the relative strength or weakness of the U.S. dollar may also
affect international trade flows of these products. A stronger U.S. dollar may
attract imports from producers outside North America, while a weaker U.S. dollar
will encourage North American exports. A stronger dollar, increasing supply, can
have a downward effect on pricing in North America, while a weaker dollar can
have a positive impact on our prices in export markets. Variations in the
exchange rates between the U.S. dollar and other currencies, particularly the
Euro and the currencies of Canada, Sweden, Finland and certain Asian countries,
significantly affect our competitive position compared to many of our
competitors.
Nearly half of our manufacturing costs and certain financial liabilities are
denominated in Canadian dollars. Increases in the value of the Canadian dollar
versus the U.S. dollar can significantly increase our costs and thus reduce our
earnings, which are reported in U.S. dollar terms. The rate of fluctuation in
exchange rates in any given quarter may vary significantly. For example in some
quarters exchange rates may change less than one cent, while in others the
change may be several cents or more.
The impact of the changes in the Canadian-U.S. dollar exchange rate on us
primarily depends on our production and sales volume, the proportion of our
production and sales that occur in Canada, the proportion of our tax and other
financial liabilities denominated in Canadian dollars, our hedging levels, and
the magnitude, direction and duration of changes in the exchange rate. Under the
exchange rates, hedging levels and operating conditions that existed for us
during the quarter ended June 30, 2003, for every one-cent change in the
Canadian-U.S. dollar exchange rate, our operating income, net of hedging, for
the second quarter of 2003 would have been reduced by approximately $2.25
million, or approximately $9 million on an annualized basis.
We expect exchange rate fluctuations to continue to impact our costs and
revenues; however, we cannot predict the magnitude or direction of this effect
for any quarter, and there can be no assurance that the future effect will be
similar to that set forth above.
WE ARE EXPOSED TO CHANGES IN BANKING AND CAPITAL MARKETS AND CHANGES IN INTEREST
RATES
We require both short-term and long-term financing to fund our operations,
including capital expenditures. Changes in banking, capital markets and/or our
credit rating could affect the cost or availability of financing. In addition,
we are exposed to changes in interest rates with respect to floating rate debt
and in determining the interest rate of any new debt issues. Changes in the
capital markets or prevailing interest rates can increase or decrease the cost
or availability of financing.
CHANGES IN THE POLITICAL OR ECONOMIC CONDITIONS IN THE UNITED STATES OR OTHER
COUNTRIES IN WHICH OUR PRODUCTS ARE MANUFACTURED OR SOLD CAN ADVERSELY AFFECT
OUR RESULTS OF OPERATIONS
We manufacture our products in the United States, Canada and South Korea, and
sell our products throughout the world. The economic and political climate of
each region has a significant impact on costs, prices of and demand for our
products. Changes in regional economies or political stability, including acts
of war or terrorist activities, can affect the cost of manufacturing and
10
distributing our products, pricing and sales volume, directly affecting our
results of operations. Such changes could also affect the availability or cost
of insurance.
RAW MATERIAL AND ENERGY PRICES ARE VOLATILE, AND SHORTAGES OR PRICE INCREASES
COULD ADVERSELY AFFECT OUR OPERATING RESULTS
We buy energy, chemicals, wood fiber, recovered paper and other raw materials on
the open market. The prices for raw materials and energy are volatile and may
change rapidly, directly affecting our results of operations. The availability
of raw materials and energy may also be disrupted by many factors outside our
control, adversely affecting our operations. We are a major user of renewable
natural resources, specifically water and wood fiber. Accordingly, significant
changes in climate and agricultural diseases or infestation could affect our
financial condition and results of operations. The volume and value of timber
that can be harvested may be limited by natural disasters such as fire, insect
infestation, disease, ice storms, wind storms, flooding and other weather
conditions and other causes. As is typical in the industry, we do not maintain
insurance for any loss to our standing timber from natural disasters or other
causes. Our supply of wood fiber is also affected by factors that impact
production levels within the lumber industry such as currency fluctuations,
duties, harvesting restrictions and finished lumber prices. See the section
entitled "Results of Operations" in our June 30, 2003 Form 10-Q.
THERE CAN BE NO ASSURANCE THAT WE WILL RETURN TO PROFITABILITY
We reported a net loss of $142.4 million for the 2002 fiscal year and a net loss
of $97.4 million for the first six months of 2003. In response to these results,
we have adopted an ongoing program that involves: (i) seeking ways to increase
operating efficiencies and productivity to reduce costs; (ii) a workforce
reduction; (iii) reducing non-essential capital spending; (iv) selling
non-strategic assets; and (v) machine closures and conversions. There can be no
assurance that these steps will enable us to return to profitability.
RISKS RELATED TO THE NOTES AND OUR STRUCTURE
THE MAJORITY OF OUR ASSETS ARE HELD, AND THE MAJORITY OF OUR OPERATIONS ARE
CONDUCTED, BY SUBSIDIARIES. BOWATER INCORPORATED DEPENDS HEAVILY UPON
DISTRIBUTIONS AND PAYMENTS FROM ITS SUBSIDIARIES.
Bowater Incorporated will depend heavily on payments on intercompany loans by
its subsidiaries or other distributions or payments to it to make payments on
the notes. These subsidiaries are separate legal entities that have no
obligation to pay any amounts due pursuant to the notes. Consequently, Bowater
Incorporated cannot assure you that the amounts it receives from its
subsidiaries will be sufficient to enable it to meet its obligations under the
notes.
THE NOTES ARE EFFECTIVELY SUBORDINATED TO ALL LIABILITIES OF OUR SUBSIDIARIES
AND TO OUR SECURED DEBT.
The majority of our assets are held, and the majority of our operations are
conducted, by subsidiaries. None of our subsidiaries will guarantee our
obligations under, or have any obligation to pay any amounts due on, the notes.
As a result, the notes will be effectively subordinated to all liabilities of
our subsidiaries and all mandatorily redeemable preferred stock of our
subsidiaries to the extent of their assets. Our rights and the rights of our
creditors, including the holders of the notes, to participate in the assets of
any of our subsidiaries upon their liquidation or recapitalization will
generally be subject to the prior claims of those subsidiaries' creditors. There
are no limitations in the indenture pertaining to the notes on the amount of
indebtedness, secured or otherwise, that may be incurred or preferred stock that
may be issued by any of our subsidiaries other than the limitations described in
the subsection entitled "Description of the Exchange Notes - Certain Covenants -
Limitation on Liens."
As of June 30, 2003, our consolidated subsidiaries had indebtedness to third
parties of approximately $1,172 million, of which approximately $112 million was
secured and approximately $598 million was guaranteed by Bowater Incorporated.
Our operating subsidiaries also have significant current and long-term
liabilities. In addition, the notes are not secured by any of our assets or
those of our subsidiaries. As a result, the notes will be effectively
subordinated to any secured debt we may incur as well as our outstanding secured
11
debt. In any liquidation, dissolution, bankruptcy or other similar proceeding,
holders of our secured debt may assert rights against any assets securing such
debt in order to receive full payment of their debt before those assets may be
used to pay the holders of the notes. At June 30, 2003, we had secured
indebtedness on a consolidated basis of approximately $112 million.
THE NOTES DO NOT RESTRICT OUR ABILITY TO INCUR ADDITIONAL DEBT OR TO TAKE OTHER
ACTIONS THAT COULD NEGATIVELY IMPACT HOLDERS OF THE NOTES.
The terms of the notes permit us to incur additional indebtedness, including,
subject to some limitations, secured debt. See the subsection entitled
"Description of the Exchange Notes - Certain Covenants - Limitation on Liens."
In addition, the limited covenants applicable to the notes do not require us to
achieve or maintain any minimum financial results relating to our financial
position or results of operations. Our ability to recapitalize, pay dividends,
incur additional debt, and take a number of other actions that are not limited
by the terms of the notes could have the effect of diminishing our ability to
make payments on the notes when due. In addition, we are not restricted from
repurchasing subordinated indebtedness or common stock by the terms of the
notes.
THE RATING OF THE NOTES OR ANY BOWATER RATING MAY BE REDUCED OR TERMINATED.
If one or more rating agencies reduces the rating of the notes or any Bowater
rating in the future or terminates any Bowater rating, the market price of the
notes would be harmed.
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We have a significant amount of indebtedness. As of June 30, 2003, we had
outstanding total debt of $2,422.5 million, a deficit of earnings to fixed
charges of $120.9 million and shareholders' equity of $1,738.8 million. Our
substantial amount of debt could have important consequences. For example, it
could:
>> limit our ability to satisfy our obligations with respect to the notes;
>> limit our ability to obtain additional financing, if needed, for working
capital, capital expenditures, acquisitions, debt service requirements or
other purposes;
>> increase our vulnerability to adverse economic and industry conditions;
>> require us to dedicate a substantial portion of our cash flow from
operations to make payments on our debt, thereby reducing funds available
for operations, future business opportunities or other purposes;
>> limit our flexibility in planning for, or reacting to, changes in our
business and our industry; and
>> place us at a competitive disadvantage compared to our competitors that
have less debt.
Our credit facilities contain various covenants including requirements to
maintain adequate net worth and compliance with a specified ratio of total debt
to total capital as defined in the credit facilities. Currently, these covenants
require us to maintain a minimum consolidated net worth (generally defined in
the credit facilities as common shareholders' equity plus any outstanding
preferred stock) of $1.625 billion. In addition, these agreements impose a
maximum 60% ratio of total debt (generally defined in the agreements as total
debt less revaluation of debt assumed through acquisitions) to total capital
(generally defined in the agreements as total debt less revaluation of debt
assumed through acquisitions plus net worth including minority interest). Our
continued compliance is dependent on a number of factors, many of which are
outside of our control. Should events occur that would result in noncompliance,
we believe that a number of acceptable options would be available to us
including, but not limited to, amending the credit facilities, obtaining a
waiver or pursuing additional or alternative financing arrangements, but we
cannot assure that these options would be available on attractive terms or at
all.
12
THERE IS NO ESTABLISHED TRADING MARKET FOR THE NOTES, AND YOU MAY NOT BE ABLE TO
SELL THEM QUICKLY OR AT THE PRICE YOU PAID.
The notes are a new issue of securities and there is no established trading
market for the notes. We do not intend to apply for the notes to be listed on
any securities exchange or to arrange for quotation on any automated dealer
quotation systems. The initial purchasers may make a market in the exchange
notes, but they are not obligated to do so, and if any of them choose to make a
market in the exchange notes, they may discontinue any such market making at any
time, in their sole discretion, without notice. As a result, we cannot assure
you as to the liquidity of any trading market for the notes.
We also cannot assure you that you will be able to sell your notes at a
particular time or that the prices that you receive when you sell will be
favorable. We cannot assure you as to the level of liquidity of the trading
market for the notes. Future trading prices of the notes will depend on many
factors, including without limitation:
>> our operating performance, financial condition and prospects;
>> the interest of securities dealers in making a market;
>> the market for similar securities;
>> the number of holders of the notes;
>> the prospects for companies in our industry generally;
>> the number of potential buyers;
>> any ratings published by major credit rating agencies;
>> the amount of debt we have outstanding;
>> the level, direction and volatility of market interest rates generally;
and
>> the time remaining to maturity of the notes.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused volatility in prices. The market for the notes may
be disrupted. Any disruptions may have a negative effect on noteholders,
regardless of our prospects and financial performance.
IF YOU DO NOT EXCHANGE YOUR ORIGINAL NOTES FOR EXCHANGE NOTES, YOUR ORIGINAL
NOTES WILL CONTINUE TO HAVE RESTRICTIONS ON TRANSFER AND MAY HAVE NO MARKET.
If you do not exchange your original notes for exchange notes in the exchange
offer, or if your original notes are tendered but not accepted, your original
notes will continue to have restrictions on transfer, but will no longer have
registration rights or accrue additional interest as liquidated damages. In
general, you may offer or sell any original notes only if the original notes are
registered under the Securities Act and applicable state laws, or resold under
an exemption from, or in a transaction not subject to, these laws. We do not
intend to register any transfers of the original notes under the Securities Act,
other than in the limited circumstances described in the Registration Rights
Agreement. If any original notes are exchanged, any trading market for the
original notes that remain outstanding could be adversely affected.
13
USE OF PROCEEDS
We will not receive any proceeds from the exchange of the exchange notes for the
original notes pursuant to the exchange offer. We received aggregate net
proceeds from the offering of the original notes of approximately $393 million,
after deducting fees and expenses associated with the offering, which were used
for the following purposes:
>> We repaid all of the approximately $70 million outstanding indebtedness
under a $100 million 364-day revolving credit facility of our wholly-
owned subsidiary, Bowater Canadian Forest Products Inc. ("BCFP");
>> We repaid all of the approximately $135 million outstanding indebtedness
under a $500 million revolving credit facility of Bowater Incorporated;
>> We reduced outstanding amounts under our $200 million accounts
receivable securitization arrangement by approximately $36 million;
>> We repaid approximately $140 million of the outstanding $240 million of
indebtedness under a term credit facility of Bowater Incorporated; and
>> We used the approximately $12 million balance of the net proceeds plus
new borrowings of approximately $40 million under our accounts receivable
securitization arrangement to terminate the lease for our Covington,
Tennessee paper coating facility and purchase the facility from the
special purpose entity that owned the facility at a total cost of
approximately $52 million.
At the time of repayment, the weighted average interest rate for obligations was
as follows: for the BCFP revolving credit facility, 2.8%; for the Bowater
Incorporated revolving credit facility, 3.3%; for the accounts receivable
securitization arrangement, 1.9%; for the Bowater Incorporated term credit
facility, 3.4%; and for the Bowater Nuway, Inc. lease, 3.2%.
The BCFP revolving credit facility matures in October 2003. We have the ability,
at our option, to extend the maturity for one additional year through October
2004. The Bowater Incorporated revolving credit facility and the term credit
facility mature in April 2005. The accounts receivable securitization facility
expires in December 2003. The base lease commitment of Bowater Nuway Inc. would
have expired on April 30, 2006.
We may borrow additional amounts under the revolving credit facilities and the
accounts receivable securitization facility and apply those proceeds to general
corporate purposes. Borrowings under each of the revolving credit facilities
incur interest based, at our election, on specified market interest rates plus a
margin tied to the credit ratings of our long-term debt.
14
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2003. This
table should be read in conjunction with our consolidated financial statements
and related notes, which are incorporated by reference in this prospectus.
(DOLLARS IN MILLIONS) JUNE 30, 2003
-------------------------------------------------------------------------------------------------
Short-term bank debt................................................................. $ 111.8
=======
Long-term debt, including current installments:
6 1/2% Notes due 2013............................................................. $ 400.0
Term loan, due 2004 & 2005 with interest at floating rates........................ 100.0
7.95% Notes due 2011.............................................................. 600.0
9.00% Debentures due 2009......................................................... 250.0
9.38% Debentures due 2021......................................................... 200.0
9.50% Debentures due in 2012...................................................... 125.0
10.63% Notes due 2010............................................................. 98.0
10.85% Debentures due 2014........................................................ 92.7
10.50% Notes due at various dates from 2003 to 2010............................... 71.4
10.60% Notes due 2011............................................................. 70.0
7.75% recycling facilities revenue bonds due 2022................................. 62.0
7.40% recycling facilities revenue bonds due 2022................................. 39.5
Industrial revenue bonds due 2029 with interest at floating rates................. 33.5
7.62% recycling facilities revenue bonds due 2016................................. 30.0
10.26% Notes due at various dates from 2003 to 2011............................... 17.6
Pollution control revenue bonds due at various dates from 2006 to 2010 with
interest at varying rates from 7.40% to 7.62%................................. 13.4
Non-interest bearing loan with Government of Quebec............................... 9.8
6.5% UDAG loan agreement due 2010................................................. 7.8
11.00% Subordinated debt due 2003................................................. 4.4
Non-interest bearing Notes due 2004............................................... 0.1
--------
Total principal amount of long-term debt, including current installments...... 2,225.2
Net premiums principally from assumed debt of a prior acquisition................. 85.5
--------
Total long-term debt including current installments........................... $2,310.7
========
Minority interest in subsidiaries.................................................... $ 71.3
========
Shareholders' equity:
Common stock, 1.00 par value, 100,000,000 shares authorized, 66,908,158 shares
issued and outstanding at June 30, 2003....................................... $ 66.9
Exchangeable shares, no par value, unlimited shares authorized 1,643,248 shares
issued and outstanding at June 30, 2003....................................... 78.3
Additional paid-in capital........................................................... 1,597.4
Retained earnings.................................................................... 529.6
Unearned compensation................................................................ (2.3)
Accumulated other comprehensive income (loss)........................................ (48.3)
Treasury stock, at cost 11,529,897 shares at June 30, 2003........................... (482.8)
--------
Total shareholders' equity.................................................... $1,738.8
========
Total capitalization.......................................................... $4,232.6
========
15
SELECTED FINANCIAL DATA
The following table summarizes our selected historical consolidated financial
information for each of the last five years and for the six-month periods ended
June 30, 2003 and 2002. The selected financial data as of and for the five years
ended December 31, 2002, under the captions "Income Statement Data," and
"Financial Position" shown below have been derived from our audited consolidated
financial statements. The selected financial data presented below as of and for
the six-month periods ended June 30, 2003 and 2002 are derived from our
unaudited consolidated financial statements. In the opinion of our management,
all adjustments (consisting of normal recurring adjustments) necessary for fair
presentation of the unaudited consolidated financial statements have been made.
The results for the six months ended June 30, 2003 are not necessarily
indicative of the results to be expected for the full year. This table should be
read in conjunction with our other financial information, including
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements included in our 2002 Form 10-K and June
30, 2003 Form 10Q and incorporated by reference into this prospectus.
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------- ------------------
2002 2001(1) 2000(1) 1999(1) 1998(1) 2003 2002
---- ------- ------- ------- ------- ---- ----
(IN MILLIONS, EXCEPT PER-SHARE AMOUNTS AND RATIO DATA)
INCOME STATEMENT DATA
Sales.................................. $2,581.1 $2,454.3 $2,500.3 $2,311.7 $2,142.7 $1,294.6 $1,271.0
Cost of sales, excluding depreciation,
amortization and cost of timber
harvested.......................... 2,020.7 1,688.4 1,549.9 1,625.2 1,422.2 1,070.6 979.1
Depreciation, amortization and cost of
timber harvested................... 340.5 321.3 295.2 300.2 229.6 168.5 172.4
Distribution costs..................... 232.6 180.0 166.6 177.0 147.7 124.5 107.2
Selling and administrative expense..... 140.2 114.5 132.6 98.7 82.6 70.8 75.9
Impairment of assets................... 28.5 -- -- 92.0 119.6 -- --
Net gain on sale of assets............. 85.7 163.3 7.3 225.4 21.1 115.1 75.0
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)................ (95.7) 313.4 363.3 244.0 162.1 (24.7) 11.4
Interest income........................ (4.5) (8.7) (15.6) (7.7) (17.5) (2.4) (2.2)
Interest expense, net of capitalized
interest........................... 163.0 141.0 135.2 126.7 98.4 82.1 83.1
Other, net............................. (3.4) (8.0) 4.5 (30.8) 65.6 10.8 5.1
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
minority
interests.......................... (250.8) 189.1 239.2 155.8 15.6 (115.2) (74.6)
Provision for income tax expense
(benefit).......................... (100.5) 77.0 70.3 71.5 25.9 (12.7) (25.3)
Minority interests in net income of
subsidiaries....................... (7.9) 41.6 9.5 5.6 8.2 (7.2) (5.8)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before cumulative effect
of accounting change............... (142.4) 70.5 159.4 78.7 (18.5) (95.3) (43.5)
Cumulative effect of accounting change. -- -- -- -- -- (2.1) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...................... $ (142.4) $ 70.5 $ 159.4 $ 78.7 $ (18.5) $ (97.4) $(43.5)
Diluted earnings (loss) per common
share.............................. $ (2.50) $ 1.32 $ 3.02 $ 1.41 $ (0.44) $ (1.71) $(0.77)
-------- -------- -------- -------- -------- -------- --------
PRODUCT SALES INFORMATION
Newsprint(2)........................... $1,199.2 $1,438.7 $1,421.5 $1,282.2 $1,108.8 $ 598.0 $581.6
Coated and specialty papers............ 613.1 479.6 428.4 363.9 440.3 338.0 306.1
Directory paper........................ -- -- -- 89.4 173.5 -- --
Market pulp............................ 498.7 403.9 546.3 434.2 272.1 240.1 242.1
Lumber and other wood products......... 270.1 132.1 104.1 142.0 148.0 118.5 141.2
-------- -------- -------- -------- -------- -------- --------
$2,581.1 $2,454.3 $2,500.3 $2,311.7 $2,142.7 $1,294.6 $1,271.0
======== ======== ======== ======== ======== ======== ========
FINANCIAL POSITION
Cash and cash equivalents.............. $ 35.9 $28.3 $20.0 $24.7 $58.3 $82.7 $29.7
Working capital (deficit).............. (21.2) (173.9) (335.8) 134.7 (77.1) 302.0 85.9
Timber and timberlands................. 212.0 243.3 265.2 283.2 472.8 188.2 214.9
Fixed assets, net...................... 3,645.6 3,802.8 2,981.1 2,581.3 2,885.2 3,603.1 3,722.0
Total assets........................... 5,590.3 5,761.0 5,004.1 4,552.2 5,092.0 5,670.5 5,677.1
Long-term debt, including current
installments 2,121.7 1,901.0 1,446.1 1,490.1 1,620.8 2,310.7 2,129.9
Total debt............................. 2,370.7 2,242.7 1,931.1 1,505.1 1,830.8 2,422.5 2,307.9
Total capitalization(3)................ 4,198.3 4,349.9 3,851.8 3,397.4 3,736.6 4,232.6 4,376.7
16
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- ---------------
2002 2001(1) 2000(1) 1999(1) 1998(1) 2003 2002
---- ------- ------- ------- ------- ---- ----
(IN MILLIONS, EXCEPT RATIO DATA)
ADDITIONAL INFORMATION
Total debt as a percentage of total
capitalization, excluding
revaluation of debt(4)............. 55.5% 50.4% 48.6% 42.1% 46.3% 56.3% 51.7%
Cash flow from operations............. $ 41.2 $372.8 $416.6 $147.0 $274.1 $41.1 $(23.8)
Cash invested in fixed assets, timber
and timberlands.................... 238.7 246.8 283.2 198.5 223.2 150.0 125.0
EBITDA(5)............................. 256.1 601.1 644.5 569.4 317.9 138.1 184.5
Ratio of total debt to EBITDA(5)...... 9.3x 3.7x 3.0x 2.6x 5.8x -- --
Ratio of EBITDA(5) to interest expense 1.6x 4.3x 4.8x 4.5x 3.2x 1.7x 2.2x
Ratio of earnings to fixed charges(6). (6) 2.1x 2.5x 2.0x 1.1x (6) (6)
--------------------------------------------------------------------------------
(1) In 2001, we acquired Alliance Forest Products Inc. In 2000, we acquired
Newsprint South, Inc. In 1999, we sold Great Northern Paper, Inc. In 1998,
we acquired Avenor Inc. and a South Korean newsprint mill.
(2) Newsprint sales do not include shipments from Ponderay Newsprint Company,
an unconsolidated entity.
(3) Total capitalization includes total debt, minority interests in
subsidiaries and shareholders' equity.
(4) The calculation of total debt as a percentage of total capitalization,
excluding revaluation of debt, excludes both in the numerator and
denominator, revaluation of debt assumed through acquisitions, as defined
in our credit facilities agreements for the purpose of calculating a
required compliance ratio of total debt to total capitalization. Total debt
as a percentage of total capitalization is the most directly comparable
measure using GAAP. A reconciliation of the GAAP items to the calculation
of total debt as a percentage of total capitalization, excluding
revaluation debt is as follows:
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- -------------------
2002 2001(1) 2000(1) 1999(1) 1998(1) 2003 2002
---- ------- ------- ------- ------- ---- ----
(IN MILLIONS, EXCEPT PERCENTAGES)
Total debt............................ $2,370.7 $2,242.7 $1,931.1 $1,505.1 $1,830.8 $2,422.5 $2,307.9
Less: Revaluation of debt............. (94.1) (102.3) (113.2) (128.6) (190.6) (89.7) (97.8)
-------- -------- -------- -------- -------- -------- --------
2,276.6 2,140.4 1,817.9 1,376.5 1,640.2 2,332.8 2,210.1
Total capitalization.................. 4,198.3 4,349.9 3,851.8 3,397.4 3,736.6 4,232.6 4,376.7
Less: Revaluation of debt............. (94.1) (102.3) (113.2) (128.6) (190.6) (89.7) (97.8)
-------- -------- -------- -------- -------- -------- --------
4,104.2 4,247.6 3,738.6 3,268.8 3,546.0 4,142.9 4,278.9
Total debt as a percentage of total
capitalization, excluding
revaluation of debt................ 55.5% 50.4% 48.6% 42.1% 46.3% 56.3% 51.7%
======== ======== ======== ======== ======== ======== ========
Total debt as a percentage of total
capitalization, in accordance with
GAAP............................... 56.5% 51.6% 50.1% 44.3% 49.0% 57.2% 52.7%
======== ======== ======== ======== ======== ======== ========
(5) EBITDA represents earnings (loss) before interest, taxes and depreciation,
amortization and the cost of timber harvested. EBITDA is not a presentation
made in accordance with GAAP and should not be considered an alternative
measure of operating income or to cash flows from operating activities as
determined in accordance with GAAP. EBITDA is included because we believe
it is a widely accepted indicator of our ability to service our debt and
make capital expenditures. EBITDA as presented herein may not be comparable
to similarly titled measures reported by other companies.
17
A reconciliation of the financial statement line items reported under GAAP
to the non-GAAP measure EBITDA is presented below.
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------- ------------------
2002 2001(1) 2000(1) 1999(1) 1998(1) 2003 2002
---- ------- ------- ------- ------- ---- ----
(IN MILLIONS)
Financial statement line items as reported under GAAP:
Net income (loss)................. $(142.4) $ 70.5 $159.4 $ 78.7 $ (18.5) $(97.4) $(43.5)
Provision for income tax expense
(benefit)..................... (100.5) 77.0 70.3 71.5 25.9 (12.7) (25.3)
Interest expense, net of
capitalized
interest...................... 163.0 141.0 135.2 126.7 98.4 82.1 83.1
Interest income................... (4.5) (8.7) (15.6) (7.7) (17.5) (2.4) (2.2)
Depreciation, amortization and
cost of timber harvested...... 340.5 321.3 295.2 300.2 229.6 168.5 172.4
------- ------ ------ ------ ------- ------ ------
EBITDA............................ $ 256.1 $601.1 $644.5 $569.4 $ 317.9 $138.1 $184.5
======= ====== ====== ====== ======= ====== ======
(6) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. Earnings consist of income before income taxes and minority
interests plus interest expense (excluding interest capitalized during the
period and amortization of previously capitalized interest) plus the
portion of rental expenses representative of the interest factor. Fixed
charges consist of total interest expense (including interest capitalized
during the period) plus the portion of rental expense representative of the
interest factor plus amortized premium and discount related to
indebtedness. In fiscal year 2002 and the six month periods ended June 30,
2003 and 2002, fixed charges exceeded earnings by $259.5 million, $120.9
million and $78.0 million, respectively.
18
THE EXCHANGE OFFER
GENERAL
As of the date of this prospectus, $400 million in aggregate principal amount of
the original notes is outstanding. This prospectus, together with the letter of
transmittal, is first being sent to holders on or about August , 2003.
PURPOSE OF THE EXCHANGE OFFER
We issued the original notes on June 19, 2003 in a transaction exempt from the
registration requirements of the Securities Act. Accordingly, the original notes
may not be reoffered, resold, or otherwise transferred unless registered under
the Securities Act or unless an applicable exemption from its registration and
prospectus delivery requirements is available.
In connection with the sale of the original notes, we entered into the
Registration Rights Agreement with the initial purchasers of the original notes,
which requires us to:
>> file an exchange offer registration statement for the original notes with
the SEC on or prior to September 17, 2003;
>> use our reasonable best efforts to cause the SEC to declare the exchange
offer registration statement effective under the Securities Act no later
than December 16, 2003; and
>> use our reasonable best efforts to complete the exchange offer within 45
days after the effective date of the registration statement.
We have filed a copy of the Registration Rights Agreement as an exhibit to our
June 30, 2003 Form 10-Q, which is incorporated by reference into the
registration statement of which this prospectus is a part.
We are making the exchange offer to satisfy our obligations under the
Registration Rights Agreement. Other than pursuant to the Registration Rights
Agreement, we are not required to file any registration statement to register
any outstanding original notes. Holders of original notes who do not tender
their original notes or whose original notes are tendered but not accepted in
the exchange offer must rely on an exemption from the registration requirements
under the securities laws, including the Securities Act, if they wish to sell
their original notes.
Neither we nor our board of directors recommends that you tender or not tender
original notes in the exchange offer. In addition, we have not authorized anyone
to make any recommendation. You must decide whether to tender in the exchange
offer and, if so, the aggregate amount of original notes to tender.
TERMS OF THE EXCHANGE
We are offering to exchange, subject to the conditions described in this
prospectus and in the letter of transmittal accompanying this prospectus, $1,000
in principal amount of exchange notes for each $1,000 in principal amount of the
original notes. The terms of the exchange notes are identical in all material
respects to the terms of the original notes, except that the exchange notes
generally will be freely transferable by holders of the exchange notes and, with
limited exceptions, will not have registration rights. The exchange notes will
evidence the same indebtedness as the original notes and will be entitled to the
benefits of the indenture. For additional information, see the section entitled
"Description of the Exchange Notes."
The exchange offer is not conditioned upon the tender of any minimum principal
amount of original notes.
We are making the exchange offer in reliance on the position of the staff of the
SEC as set forth in a series of interpretive letters addressed to third parties
in other transactions. We have not requested, and do not intend to request, an
interpretation by the staff of the SEC as to whether the exchange notes issued
in exchange for the original notes may be offered for sale, resold or otherwise
transferred by any holder without compliance with the registration and
prospectus delivery provisions of the Securities Act, so we can provide no
assurance that the staff of the SEC would make a similar determination with
respect to the exchange offer. Based on staff interpretations issued to third
parties, we believe that the exchange notes will generally be freely
19
transferable by holders after the exchange offer without further registration
under the Securities Act (assuming the truth of certain representations required
to be made by each tendering holder of notes, as set forth below). For
additional information on the SEC's position, we refer you to the following
no-action letters: Exxon Capital Holdings Corporation, available May 13, 1988;
Mary Kay Cosmetics, Inc., available June 5, 1991; Morgan Stanley & Co.
Incorporated, available June 5, 1991; and Shearman & Sterling, available July 2,
1993. However, any purchaser of original notes who is one of our "affiliates,"
who intends to participate in the exchange offer for the purpose of distributing
the exchange notes, or who is a broker-dealer who purchased original notes from
us to resell pursuant to Rule 144A or any other available exemption under the
Securities Act:
>> will not be able to rely on the interpretations of the staff of the SEC;
and
>> must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of the notes
unless such sale or transfer is made pursuant to an exemption from these
requirements.
If you wish to exchange your original notes for exchange notes in the exchange
offer, you will be required to make representations, including that:
>> you are not our "affiliate" (as defined in Rule 405 under the Securities
Act) or, if you are our affiliate, you will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable;
>> any exchange notes to be received by you in the exchange offer will be
acquired in the ordinary course of your business;
>> you have no arrangement or understanding with any person to participate
in the distribution of the exchange notes in violation of the provisions
of the Securities Act;
>> if you are not a broker-dealer, you are not engaged in, and do not intend
to engage in, a distribution of exchange notes; and
>> you have full power and authority to transfer your original notes in
exchange for any exchange notes to be received by you, and we will
acquire good and unencumbered title to the original notes you exchange,
free and clear of any liens, restrictions, charges, encumbrances and
adverse claims.
In addition, in connection with any resales of exchange notes, any broker-dealer
who acquired original notes for its own account as a result of market-making or
other trading activities, who we refer to as "participating broker-dealers,"
must acknowledge to us that it will deliver a prospectus meeting the
requirements of the Securities Act. The SEC has taken the position that
participating broker-dealers may fulfill their prospectus delivery requirements
with respect to the exchange notes, other than a resale of an unsold allotment
from the original sale of the notes, with the prospectus contained in the
exchange offer registration statement. Under the Registration Rights Agreement,
we are required to allow participating broker-dealers and other persons, if any,
subject to similar prospectus delivery requirements to use the prospectus
contained in the exchange offer registration statement in connection with the
resale of the exchange notes. For additional information, see the section
entitled "Plan of Distribution."
The exchange notes will accrue interest from the last interest payment date on
which interest was paid on the original notes or, if no interest was paid on the
original notes, from the date of issuance of the original notes, which was June
19, 2003. Holders whose original notes are accepted for exchange will be deemed
to have waived the right to receive any interest accrued on the original notes.
Tendering holders of the original notes will not be required to pay brokerage
commissions or fees or, transfer taxes, except as specified in the instructions
in the letter of transmittal, with respect to the exchange of the original notes
in the exchange offer.
20
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The exchange offer will expire at 5:00 p.m., New York City time, on September ,
2003, unless we, in our sole discretion, extend the period of time for which the
exchange offer is open. The time and date, as it may be extended, is referred to
in this prospectus as the "expiration date." The expiration date will be at
least 20 business days after the commencement of the exchange offer in
accordance with Rule 14e-1(a) under the Exchange Act. Although we have no
present intention of doing so, we have the right, at any time or from time to
time, to extend the period of time during which the exchange offer is open, and
thereby delay acceptance for exchange of any original notes. We may extend the
expiration date by giving oral or written notice of the extension to the
exchange agent and by timely public announcement no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
expiration date. During the extension, all original notes previously tendered
will remain subject to the exchange offer unless properly withdrawn.
We expressly reserve the right to:
>> terminate or amend the exchange offer and not to accept for exchange any
original notes not previously accepted for exchange upon the occurrence
of any of the events specified below under the subsection entitled
"Conditions to the Exchange Offer" which have not been waived by us; and
>> amend the terms of the exchange offer in any manner which, in our good
faith judgment, is advantageous to the holders of the original notes,
whether before or after any tender of the original notes.
If any termination or amendment occurs, we will notify the exchange agent and
will either issue a press release or give oral or written notice to the holders
of the original notes as promptly as practicable.
For purposes of the exchange offer, a "business day" means any day other than
Saturday, Sunday or a date on which banking institutions in New York, New York
are required by law, regulation or executive order to remain closed, and
consists of the time period from 12:01 a.m. through 12:00 midnight, New York
City time. Unless we terminate the exchange offer prior to 5:00 p.m., New York
City time, on the expiration date, we will exchange the exchange notes for the
original notes promptly following the expiration date.
PROCEDURES FOR TENDERING ORIGINAL NOTES
Our acceptance of original notes tendered by a holder will constitute a binding
agreement between the tendering holder and us upon the terms and subject to the
conditions described in this prospectus and in the accompanying letter of
transmittal. All references in this prospectus to the letter of transmittal are
deemed to include a facsimile of the letter of transmittal.
A holder of original notes may tender the original notes by:
>> properly completing and signing the letter of transmittal;
>> properly completing any required signature guarantees;
>> properly completing any other documents required by the letter of
transmittal; and
>> delivering all of the above, together with the certificate or
certificates representing the original notes being tendered, to the
exchange agent at its address set forth below on or prior to the
expiration date; or
>> complying with the procedure for book-entry transfer described below; or
>> complying with the guaranteed delivery procedures described below.
The method of delivery of original notes, letters of transmittal and all other
required documents is at the election and risk of the holders. If the delivery
is by mail, it is recommended that registered mail properly insured, with return
receipt requested, be used. In all cases, sufficient time should be allowed to
ensure timely delivery. Holders should not send original notes or letters of
transmittal to us.
The signature on the letter of transmittal need not be guaranteed if:
>> tendered original notes are registered in the name of the signer of the
letter of transmittal;
21
>> the exchange notes to be issued in exchange for the original notes are to
be issued in the name of and delivered to the holder; and
>> any untendered original notes are to be reissued in the name of the
holder.
See Instruction 1 to the Letter of Transmittal. In any other case, the tendered
original notes must be:
>> endorsed or accompanied by written instruments of transfer in form
satisfactory to us;
>> duly executed by the holder; and
>> the signature on the endorsement or instrument of transfer must be
guaranteed by a bank, broker, dealer, credit union, savings association,
clearing agency or other institution, each an "eligible guarantor
institution" that is a member of a recognized signature guarantee
medallion program within the meaning of Rule 17Ad-15 under the Exchange
Act.
If the exchange notes and/or original notes not exchanged are to be delivered to
an address other than that of the registered holder appearing on the note
register for the original notes, the signature in the letter of transmittal must
be guaranteed by an eligible institution.
The exchange agent will make a request within two business days after the date
of this prospectus to establish accounts with respect to the original notes at
The Depository Trust Company, the "book-entry transfer facility," for the
purpose of facilitating the exchange offer. We refer to the Depository Trust
Company in this prospectus as "DTC." Subject to establishing the accounts, any
financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of original notes by causing the
book-entry transfer facility to transfer the original notes into the exchange
agent's account with respect to the original notes in accordance with the
book-entry transfer facility's procedures for the transfer. Although delivery of
original notes may be effected through book-entry transfer into the exchange
agent's account at the book-entry transfer facility, an appropriate letter of
transmittal with any required signature guarantee and all other required
documents, or an agent's message (as defined below), must in each case be
properly transmitted to and received or confirmed by the exchange agent at its
address set forth below prior to the expiration date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures.
The exchange agent has confirmed with DTC that the exchange offer is eligible
for the DTC Automated Tender Offer Program. We refer to the Automated Tender
Offer Program in this prospectus as "ATOP." Accordingly, DTC participants may,
in lieu of physically completing and signing the letter of transmittal and
delivering it to the exchange agent, electronically transmit their acceptance of
the exchange offer by causing DTC to transfer original notes to the exchange
agent in accordance with DTC's ATOP procedures for transfer. DTC will then send
an agent's message to the exchange agent.
The term "agent's message" means a message which:
>> is transmitted by DTC;
>> received by the exchange agent and forms part of the book-entry transfer;
>> states that DTC has received an express acknowledgment from a participant
in DTC that is tendering original notes which are the subject of the
book-entry transfer;
>> states that the participant has received and agrees to be bound by all of
the terms of the letter of transmittal; and
>> states that we may enforce the agreement against the participant.
If a holder desires to accept the exchange offer and time will not permit a
letter of transmittal or original notes to reach the exchange agent before the
expiration date or the procedure for book-entry transfer cannot be completed on
a timely basis, the holder may effect a tender if the exchange agent has
received at its address set forth below on or prior to the expiration date, a
letter, telegram or facsimile transmission, and an original delivered by
guaranteed overnight courier, from an eligible institution setting forth:
22
>> the name and address of the tendering holder;
>> the names in which the original notes are registered and, if possible,
the certificate numbers of the original notes to be tendered; and
>> a statement that the tender is being made thereby and guaranteeing that
within three business days after the expiration date, the original notes
in proper form for transfer, or a confirmation of book-entry transfer of
such original notes into the exchange agent's account at the book-entry
transfer facility and an agent's message, will be delivered by the
eligible institution together with a properly completed and duly executed
letter of transmittal and any other required documents.
Unless original notes being tendered by the above-described method are deposited
with the exchange agent, a tender will be deemed to have been received as of the
date when:
>> the tendering holder's properly completed and duly signed letter of
transmittal, or a properly transmitted agent's message, accompanied by
the original notes or a confirmation of book-entry transfer of the
original notes into the exchange agent's account at the book-entry
transfer facility is received by the exchange agent; or
>> a notice of guaranteed delivery or letter, telegram or facsimile
transmission to similar effect from an eligible institution is received
by the exchange agent.
Issuances of exchange notes in exchange for original notes tendered pursuant to
a notice of guaranteed delivery or letter, telegram or facsimile transmission to
similar effect by an eligible institution will be made only against deposit of
the letter of transmittal and any other required documents and the tendered
original notes or a confirmation of book-entry and an agent's message.
All questions as to the validity, form, eligibility, including time of receipt,
and acceptance of original notes tendered for exchange will be determined by us
in our sole discretion, which determination will be final and binding. We have
the absolute right to reject any and all tenders of any original notes not
properly tendered and not to accept any original notes which acceptance might,
in our judgment or the judgment of our counsel, be unlawful. We also have the
absolute right to waive any defects or irregularities or conditions of the
exchange offer as to any original notes either before or after the expiration
date, including the right to waive the ineligibility of any holder who seeks to
tender original notes in the exchange offer. The interpretation of the terms and
conditions of the exchange offer, including the letter of transmittal and the
instructions contained in the letter of transmittal, by us will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of original notes for exchange must be cured within such
reasonable period of time as we determine. Neither we, the exchange agent nor
any other person has any duty to give notification of any defect or irregularity
with respect to any tender of original notes for exchange, nor will any of us
incur any liability for failure to give such notification.
If the letter of transmittal is signed by a person or persons other than the
registered holder or holders of original notes, the original notes must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders appear on the
original notes.
If the letter of transmittal or any original notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
us, such persons must submit proper evidence satisfactory to us of their
authority to so act.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The letter of transmittal contains, among other things, the following terms and
conditions, which are part of the exchange offer.
The party tendering original notes for exchange notes exchanges, assigns and
transfers the original notes to us and irrevocably constitutes and appoints the
23
exchange agent as his agent and attorney-in-fact to cause the original notes to
be assigned, transferred and exchanged. We call the party tendering notes the
"transferor." The transferor also warrants that it will, upon request, execute
and deliver any additional documents deemed by the exchange agent or us to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered original notes or transfer ownership of such original notes on the
account books maintained by a book-entry transfer facility. All authority
conferred by the transferor will survive the death or incapacity of the
transferor and every obligation of the transferor will be binding upon the
heirs, legal representatives, successors, assigns, executors and administrators
of the transferor.
The transferor certifies that:
>> it is not our "affiliate" (as defined in Rule 405 under the Securities
Act) or, if it is our affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable;
>> any exchange notes to be received by it in the exchange offer will be
acquired in the ordinary course of its business;
>> it has no arrangement or understanding with any person to participate in
the distribution of the exchange notes in violation of the provisions of
the Securities Act;
>> if it is not a broker-dealer, it is not engaged in, and does not intend
to engage in, a distribution of exchange notes; and
>> it has full power and authority to transfer its original notes in
exchange for any exchange notes to be received by it, and we will acquire
good and unencumbered title to the original notes it exchanges, free and
clear of any liens, restrictions, charges, encumbrances and adverse
claims.
In addition, in connection with any resales of exchange notes, any broker-dealer
who acquired the original notes for its own account as a result of market-making
or other trading activities must acknowledge to us that it will deliver a
prospectus meeting the requirements of the Securities Act. By so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. The SEC has
taken the position that participating broker-dealers may fulfill their
prospectus delivery requirements with respect to exchange notes, other than a
resale of an unsold allotment from the original offering of the original notes,
with the prospectus contained in an exchange offer registration statement. Under
the Registration Rights Agreement, we are required to allow participating
broker-dealers and other persons, if any, subject to similar prospectus delivery
requirements to use the prospectus contained in the exchange offer registration
statement in connection with the resale of the exchange notes. For additional
information, see the section entitled "Plan of Distribution."
WITHDRAWAL RIGHTS
Tenders of original notes may be withdrawn at any time prior to the expiration
date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission, with receipt confirmed by telephone, or letter
must be received by the exchange agent at the address set forth in this
prospectus prior to the expiration date. Any notice of withdrawal must:
>> specify the name of the person having tendered the original notes to be
withdrawn;
>> identify the original notes to be withdrawn, including the certificate
number or numbers and principal amount of such original notes;
>> specify the principal amount of original notes to be withdrawn;
>> include a statement that the holder is withdrawing his election to have
the original notes exchanged;
>> be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the original notes were tendered or as
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otherwise described above, including any required signature guarantees,
or be accompanied by documents of transfer sufficient to have the trustee
under the indenture register the transfer of the original notes into the
name of the person withdrawing the tender; and
>> specify the name in which any such original notes are to be registered,
if different from that of the person who tendered the original notes.
The exchange agent will return the properly withdrawn original notes promptly
following receipt of the notice of withdrawal. If original notes have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn original notes or otherwise
comply with the book-entry transfer facility procedure. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by us, in our sole discretion, and our determination will be final
and binding on all parties.
Any original notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the exchange offer. Any original notes which have
been tendered for exchange but which are not exchanged for any reason will be
returned to the holder without cost to the holder. In the case of original notes
tendered by book-entry transfer into the exchange agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described above, the original notes will be credited to an account with the
book-entry transfer facility specified by the holder. In either case, the
original notes will be returned as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Properly withdrawn
original notes may be retendered by following one of the procedures described
under the subsection entitled "Procedures for Tendering Original Notes" above at
any time prior to the expiration date.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer, we
will accept, on the expiration date, all original notes properly tendered and
not properly withdrawn and will issue the exchange notes promptly after such
acceptance. See the subsection entitled "Conditions to the Exchange Offer" below
for more detailed information. For purposes of the exchange offer, we will be
deemed to have accepted properly tendered original notes for exchange when, and
if, we have given oral or written notice of our acceptance to the exchange
agent.
For each original note accepted for exchange, the holder of the original note
will receive an exchange note having a principal amount equal to that of the
surrendered original note.
In all cases, issuance of exchange notes for original notes that are accepted
for exchange pursuant to the exchange offer will be made only after timely
receipt by the exchange agent of:
>> certificates for the original notes or confirmation of book-entry transfer
of the original notes into the exchange agent's account at the book-entry
transfer facility;
>> a properly completed and duly executed letter of transmittal, or a
properly transmitted agent's message; and
>> all other required documents.
If any tendered original notes are not accepted for any reason described in the
terms and conditions of the exchange offer or if original notes are submitted
for a greater principal amount than the holder desires to exchange, the
unaccepted or non-exchanged original notes will be returned without expense to
the tendering holder of the original notes. In the case of original notes
tendered by book-entry transfer into the exchange agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described above, the non-exchanged original notes will be credited to an account
maintained with the book-entry transfer facility. In either case, the original
notes will be returned as promptly as practicable after the expiration of the
exchange offer.
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CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer, or any extension of
the exchange offer, we will not be required to accept for exchange, or to issue
exchange notes in exchange for, any original notes and may terminate or amend
the exchange offer, by oral or written notice to the exchange agent or by a
timely press release, if at any time before the acceptance of the original notes
for exchange or the exchange of the exchange notes for such original notes, any
of the following conditions exist:
>> the exchange offer violates applicable law or any applicable interpretation
of the staff of the SEC;
>> any action or proceeding is instituted or threatened in any court or by any
governmental agency which might materially impair our ability to proceed
with the exchange offer or any material adverse development shall have
occurred in any existing action or proceeding with respect to us; or
>> any governmental approval shall not have been obtained, which we deem
necessary for the consummation of the exchange offer.
Regardless of whether any of the conditions has occurred, we may amend the
exchange offer in any manner which, in our good faith judgment, is advantageous
to holders of the original notes.
The conditions described above are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to the condition or we may waive
any condition in whole or in part at any time and from time to time in our sole
discretion. Our failure at any time to exercise any of the rights described
above will not be deemed a waiver of the right and each right will be deemed an
ongoing right which we may assert at any time and from time to time.
If we waive or amend the conditions above, we will, if required by law, extend
the exchange offer for a minimum of five business days from the date that we
first give notice, by public announcement or otherwise, of the waiver or
amendment, if the exchange offer would otherwise expire within the five
business-day period. Any determination by us concerning the events described
above will be final and binding upon all parties.
The exchange offer is not conditioned upon any minimum principal amount of
original notes being tendered.
EXCHANGE AGENT
The Bank of New York, has been appointed as the exchange agent for the exchange
offer. All executed letters of transmittal should be directed to the exchange
agent at one of the addresses set forth below:
By Registered or By Facsimile: By Hand or Overnight
Certified Mail: (212) 298-1915 Courier:
The Bank of New York The Bank of New York
Corporate Trust Operations Confirm by Telephone: Corporate Trust Operations
Reorganization Unit (212) 815-3750 Reorganization Unit
101 Barclay Street, 7E 101 Barclay Street, Lobby Window
New York, New York 10286 New York, New York 10286
Attention: Kin Lau 7E Attention: Kin Lau 7E
You should direct questions and requests for assistance, requests for additional
copies of this prospectus or of the letter of transmittal and requests for
notices of guaranteed delivery to the exchange agent at the address and
telephone number set forth in the letter of transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF TRANSMITTAL, OR
TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE SET
FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE A VALID DELIVERY.
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SOLICITATION OF TENDERS; FEES AND EXPENSES
We will pay the estimated cash expenses to be incurred in connection with the
exchange offer, which includes fees and expenses of the exchange agent, trustee,
registration fees, accounting, legal, printing and related fees and expenses. We
have not retained any dealer-manager in connection with the exchange offer and
will not make any payments to brokers, dealers or others soliciting acceptances
of the exchange offer. We, however, will pay the exchange agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. We will also pay brokerage
houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this and other
related documents to the beneficial owners of the original notes and in handling
or forwarding tenders for their customers.
No person has been authorized to give any information or to make any
representations in connection with the exchange offer other than those contained
in this prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by us. Neither the delivery of this
prospectus nor any exchange made pursuant to this prospectus, under any
circumstances, create any implication that there has been no change in our
affairs since the respective dates as of which information is given in this
prospectus. The exchange offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of original notes in any jurisdiction in
which the making of the exchange offer or the acceptance of the exchange offer
would not be in compliance with the laws of the jurisdiction. However, we may,
at our discretion, take such action as we may deem necessary to make the
exchange offer in the jurisdiction and extend the exchange offer to holders of
original notes in the jurisdiction.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of original
notes pursuant to the exchange offer. However, the transfer taxes will be
payable by the tendering holder if:
>> certificates representing exchange notes or original notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or
are to be issued in the name of, any person other than the registered
holder of the original notes tendered; or
>> tendered original notes are registered in the name of any person other
than the person signing the letter of transmittal; or
>> a transfer tax is imposed for any reason other than the exchange of
original notes pursuant to the exchange offer.
We will bill the amount of the transfer taxes directly to the tendering holder
if satisfactory evidence of payment of the taxes or exemption therefrom is not
submitted with the letter of transmittal, and the exchange notes need not be
delivered until the transfer taxes are paid.
ACCOUNTING TREATMENT
For accounting purposes, we will not recognize gain or loss upon the exchange of
the exchange notes for original notes. We will amortize expenses incurred in
connection with the issuance of the exchange notes over the term of the exchange
notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of original notes who do not exchange their original notes for exchange
notes pursuant to the exchange offer will continue to be subject to the
restrictions on transfer of the original notes as described in the legend on the
original notes. Original notes not exchanged pursuant to the exchange offer will
continue to remain outstanding in accordance with their terms. In general, the
original notes may not be offered or sold unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. We do not currently
anticipate that we will register the original notes under the Securities Act.
27
Participation in the exchange offer is voluntary, and holders of original notes
should carefully consider whether to participate. Holders of original notes are
urged to consult their financial and tax advisors in making their own decision
on what action to take.
As a result of the making of, and upon acceptance for exchange of all validly
tendered original notes pursuant to the terms of, this exchange offer, we will
have fulfilled a covenant contained in the Registration Rights Agreement.
Holders of original notes who do not tender their original notes in the exchange
offer will continue to hold the original notes and will be entitled to all the
rights and limitations applicable to the original notes under the indenture,
except for any rights under the Registration Rights Agreement that by their
terms terminate or cease to have further effectiveness as a result of the making
of this exchange offer. All untendered original notes will continue to be
subject to the restrictions on transfer described in the indenture. To the
extent that original notes are tendered and accepted in the exchange offer, the
trading market for untendered original notes could be adversely affected.
We may in the future seek to acquire, subject to the terms of the indenture,
untendered original notes in open market or privately negotiated transactions,
through subsequent exchange offers or otherwise. We have no present plan to
acquire any original notes which are not tendered in the exchange offer.
RESALE OF EXCHANGE NOTES
We are making the exchange offer in reliance on the position of the staff of the
SEC as set forth in interpretive letters addressed to third parties in other
transactions. We have not sought our own interpretive letter, and we can provide
no assurance that the staff would make a similar determination with respect to
the exchange offer as it has in such interpretive letters to third parties.
Based on these interpretations by the staff, we believe that the exchange notes
issued pursuant to the exchange offer in exchange for original notes may be
offered for resale, resold and otherwise transferred by a holder, other than any
holder who is a broker-dealer or an "affiliate" of ours within the meaning of
Rule 405 of the Securities Act, without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that:
>> the exchange notes are acquired in the ordinary course of the holder's
business;
>> the holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution of the exchange notes;
and
>> the holder is not engaged in, and does not intend to engage in, a
distribution of the exchange notes.
However, any holder who:
>> is an "affiliate" of ours;
>> has an arrangement or understanding with respect to the distribution of
the exchange notes to be acquired pursuant to the exchange offer; or
>> is a broker-dealer who purchased original notes from us to resell pursuant
to Rule 144A or any other available exemption under the Securities Act,
could not rely on the applicable interpretations of the staff and must comply
with the registration and prospectus delivery requirements of the Securities
Act. A broker-dealer who holds original notes that were acquired for its own
account as a result of market-making or other trading activities may be deemed
to be an "underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of exchange notes. Each such broker-dealer that
receives exchange notes for its own account in exchange for original notes,
where the broker-dealer acquired the original notes as a result of market-making
activities or other trading activities, must acknowledge, as provided in the
letter of transmittal, that it will deliver a prospectus in connection with any
resale of such exchange notes. For more detailed information, see the section
entitled "Plan of Distribution."
In addition, to comply with the securities laws of various jurisdictions, if
applicable, the exchange notes may not be offered or sold unless they have been
registered or qualified for sale in the jurisdiction or an exemption from
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registration or qualification is available and is complied with. We have agreed,
pursuant to the Registration Rights Agreement and subject to specified
limitations therein, to use our reasonable best efforts to register or qualify
the exchange notes for offer and sale under the securities or blue sky laws of
such jurisdictions within the United States as any of certain limited classes of
holders of the exchange notes may reasonably request. Such registration or
qualification may require the imposition of restrictions or conditions,
including suitability requirements for offerees or purchasers, in connection
with the offer or sale of any exchange notes. We have also agreed to use our
reasonable best efforts to cause the exchange notes to be registered with or
approved by such other governmental agencies or authorities as may be reasonably
necessary to enable sellers of the exchange notes to dispose of such notes,
subject to certain limitations.
SHELF REGISTRATION STATEMENT
If:
>> any changes in law or the applicable interpretations of the staff of the SEC
do not permit us to effect the exchange offer;
>> for any reason the exchange offer is not completed by January 30, 2004;
>> any holder of the original notes, other than the initial purchasers, is not
eligible to participate in the exchange offer;
>> an eligible holder who complies with the material terms of the exchange
offer does not receive exchange notes that may be sold without restrictions
under state and federal securities laws; or
>> the original notes held by an initial purchaser have the status of unsold
allotments in an initial distribution, and the initial purchaser so
requests,
we will, at our cost:
>> use our reasonable best efforts to file, as promptly as practicable and in
any event on or prior to 30 days after such filing obligation arises, a
shelf registration statement covering resales of the original notes or
exchange notes, as applicable;
>> use our reasonable best efforts to cause the shelf registration statement to
be declared effective under the Securities Act within 120 days after such
filing obligation arises; and
>> use our reasonable best efforts to keep the shelf registration effective
until June 19, 2005, subject to extension in certain circumstances (or until
all notes covered by the shelf registration are sold, if earlier).
If we file a shelf registration statement, we will provide to each holder of the
notes copies of the prospectus which is a part of the shelf registration
statement, notify each holder when the shelf registration statement for the
notes has become effective, and take other actions as are required to permit
unrestricted resales of the notes.
A holder of notes that sells the notes pursuant to the shelf registration
statement generally will be:
>> required to be named as a selling security holder in the related prospectus
and deliver a prospectus to purchasers;
>> subject to certain of the civil liability provisions under the Securities
Act in connection with the sales; and
>> bound by the provisions of the Registration Rights Agreement which are
applicable to such a holder, including indemnification obligations.
In addition, each holder of the notes will be required to deliver information to
be used in connection with the shelf registration statement within the time
periods described in the Registration Rights Agreement in order to have their
notes included in the shelf registration statement and to benefit from the
provisions regarding liquidated damages described in the following paragraph.
Each holder of registrable notes covered by the shelf registration statement
will be afforded an opportunity to review the shelf registration statement and
29
any amendments or supplements to the shelf registration statement or the related
prospectus prior to such document being filed with the SEC, and in certain
circumstances, we will incorporate changes in such documents at the request of
holders of a majority in aggregate principal amount of registrable notes covered
by the shelf registration statement.
LIQUIDATED DAMAGES
If any one or more of the following (a "registration default") occurs:
>> the exchange offer registration statement is not filed with the SEC on or
before September 17, 2003;
>> the exchange offer registration statement is not declared effective on or
before December 16, 2003;
>> the exchange offer is not completed on or before the 45th day following the
date of the effectiveness of the registration statement or, if that day is
not a business day, then the next day that is a business day; or
>> the shelf registration statement is required to be filed but it is not filed
or declared effective within the time periods required by the Registration
Rights Agreement or is declared effective but thereafter ceases to be
effective or usable (subject to certain exceptions),
the interest rate borne by the original notes will be increased by 0.25%. We
refer to this increase in the interest rate on the notes as "liquidated
damages." Such interest is payable in addition to any other interest payable
from time to time with respect to the notes in cash on each interest payment
date to the holders of record for such interest payment date. After the cure of
registration defaults, the accrual of liquidated damages will stop and the
interest rate will revert to the original rate.
Under certain circumstances, we may delay the filing or the effectiveness of the
exchange offer or the shelf registration and shall not be required to maintain
its effectiveness or amend or supplement it for a period of up to 60 days during
any 12-month period. Any delay period will not alter our obligation to pay
liquidated damages with respect to a registration default.
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DESCRIPTION OF THE EXCHANGE NOTES
The terms of the exchange notes are substantially identical to the terms of the
original notes except that the exchange notes are registered under the
Securities Act, will be freely tradeable and, with limited exceptions, will not
have registration rights. We refer to the exchange notes in this section simply
as the "notes."
GENERAL
We will issue the notes under an indenture, which is a contract between us and
The Bank of New York, as trustee. The trustee's main role is to enforce your
rights against us if we default. We describe some limitations on the extent to
which the trustee acts on your behalf under the subsection entitled "Remedies if
an Event of Default Occurs." The trustee will also act as registrar, paying
agent and authenticating agent, and perform administrative duties for us, such
as sending out interest payments and notices under the indenture.
The following description of the provisions of the indenture is only a summary.
This summary is not complete. We recommend that you read the entire indenture
carefully before investing in the notes. You can obtain a copy of the indenture
by following the directions under the caption "Where You Can Find More
Information About Bowater Incorporated" on page (ii) of this prospectus.
The amount of debt securities we can issue under the indenture is unlimited. We
may issue additional notes of the same series as the notes without your consent
and without notifying you. Any such additional notes will have the same ranking,
interest rate, maturity date and other terms as the notes. Any such additional
notes, together with the notes offered by this memorandum, will constitute a
single series of debt securities under the indenture. The notes will be issued
in principal amounts of $1,000 and any integral multiple thereof.
After the completion of the exchange offer, the Trust Indenture Act of 1939 will
be deemed to apply to the indenture, and we refer you to the Trust Indenture Act
for additional terms and definitions that will apply to the indenture at that
time.
Some of the terms used in this section are defined in the subsection entitled
"Definitions for Certain Covenants" below. WHEN WE REFER TO "BOWATER," "WE,"
"OUR" OR "US," IN THIS SECTION, WE REFER ONLY TO BOWATER INCORPORATED, A
DELAWARE CORPORATION, AND NOT TO ITS SUBSIDIARIES.
PRINCIPAL, MATURITY AND INTEREST
The notes will be a series of debt securities under the indenture. We will issue
the notes in an initial aggregate principal amount of $400,000,000.
The notes will mature on June 15, 2013. Interest will accrue from the issue date
of the notes at a rate equal to 6 1/2% per year. We will pay interest on the
notes on June 15 and December 15 of each year, beginning on December 15, 2003.
The notes will not be entitled to any sinking fund.
RANKING
The notes will be our unsecured obligations and will rank equally with all of
our existing and future senior unsecured debt. The notes will rank senior to any
of our debt that may be expressly subordinated to the notes, but will be
effectively subordinated to any secured indebtedness to the extent of the assets
securing that indebtedness.
The majority of our assets are held, and the majority of our operations are
conducted, by subsidiaries. As a result, we depend heavily upon payments on
intercompany loans by our subsidiaries or other distributions or payments to us
to make payments on the debt. Our subsidiaries are separate legal entities that
have no obligation to pay any amounts due under the notes. We cannot assure you
that the amounts we receive from our subsidiaries will be sufficient to enable
us to meet our obligations under the notes. In addition, none of our
subsidiaries will guarantee our obligations under, or have any obligation to pay
any amounts due on, the notes. As a result, the notes will be effectively
subordinated to all liabilities of our subsidiaries. Our rights and the rights
of our creditors, including the holders of the notes, to participate in the
assets of any of our subsidiaries upon their liquidation or recapitalization
will generally be subject to the prior claims of those subsidiaries' creditors.
There are no limitations in the indenture pertaining to the notes on the amount
of indebtedness, secured or otherwise, that may be incurred or preferred stock
that may be issued by any of our subsidiaries other than the limitations
31
described in the subsection entitled "Description of the Exchange Notes -
Certain Covenants - Limitation on Liens."
As of June 30, 2003, Bowater Incorporated had no secured indebtedness on an
unconsolidated basis, and our consolidated subsidiaries had indebtedness to
third parties of approximately $1,172 million, of which approximately $112
million was secured and approximately $598 million was guaranteed by Bowater
Incorporated. In addition our operating subsidiaries have significant current
and long-term liabilities. As of June 30, 2003, Bowater Incorporated on an
unconsolidated basis had approximately $1,251 million of unsecured indebtedness
and approximately $455 million of additional unsecured indebtedness available
to be borrowed under its credit facilities.
OPTIONAL REDEMPTION
We may redeem some or all of the notes at any time. If we choose to redeem any
notes prior to maturity, we will pay a redemption price equal to the greater of
the following amounts, plus, in each case, accrued and unpaid interest to the
redemption date:
>> 100% of the principal amount of the notes being redeemed; or
>> the sum of the present values of the remaining scheduled payments of the
principal of and interest on the notes being redeemed, discounted to the
redemption date in accordance with standard market practice (on a
semiannual compounding basis and assuming a 360-day year consisting of
twelve 30-day months) at the treasury rate referred to below plus 45
basis points.
If we choose to redeem any notes, we will mail a notice of redemption not less
than 30 days and not more than 60 days before the redemption date. If we are
redeeming less than all the notes, the trustee will select the particular notes
to be redeemed by lot or pro rata or by another method the trustee deems fair
and appropriate. Unless we default in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the notes or
portions of the notes called for redemption.
For purposes of calculating the redemption price in connection with the
redemption of the notes on any redemption date, the following terms have the
meanings set forth below:
"Treasury rate" means the semiannual equivalent yield to maturity of the
treasury security, referred to below, that corresponds to the treasury price
referred to below, calculated in accordance with standard market practice and
computed as of the second trading day preceding the redemption date.
"Treasury security" means the United States Treasury security that the treasury
dealer, referred to below, determines would be appropriate to use, at the time
of determination and in accordance with standard market practice, in pricing the
notes being redeemed in a tender offer based on a spread to United States
Treasury yields.
"Treasury price" means the bid-side price for the treasury security as of the
third trading day preceding the redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York on that trading day and designated "Composite 3:30 p.m.
Quotations for U.S. Government Securities," except that:
>> if that release (or any successor release) is not published or does not
contain that price information on that trading day; or
>> if the treasury dealer determines that price information is not
reasonably reflective of the actual bid-side price for the treasury
security prevailing at 3:30 p.m., New York City time, on that trading
day, then treasury price will instead mean the bid-side price for the
treasury security at or around 3:30 p.m., New York City time, on that
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trading day (expressed on a next trading day settlement basis) as
determined by the treasury dealer through such alternative means as the
treasury dealer considers to be appropriate under the circumstances.
"Treasury dealer" means each of UBS Securities LLC and J.P. Morgan Securities
Inc. (or their respective successors) or, if either of them (or their respective
successors) refuses to act as treasury dealer for these purposes or ceases to be
a primary government securities dealer, another nationally recognized investment
banking firm that is a primary U.S. government securities dealer specified by us
for these purposes.
All determinations made by the treasury dealer with respect to determining the
redemption price will be final and binding on all parties, absent manifest
error.
CERTAIN COVENANTS
We define some of the terms we use in the next two subsections below under the
section entitled "Definitions for Certain Covenants."
LIMITATION ON LIENS
Neither Bowater nor any Restricted Subsidiary may create, incur, assume or
suffer to exist any Lien upon any Principal Property, whether owned at the date
of the indenture or acquired later, to secure any Indebtedness, without securing
the notes (together with, if Bowater so determines, any Indebtedness of Bowater
or any Restricted Subsidiary that is not subordinate to the notes and any debt
securities of any other series then outstanding under the indenture) by that
Lien equally and ratably with, or prior to, any and all other Indebtedness
secured by it, so long as that Indebtedness is so secured.
The foregoing restriction will not apply to Indebtedness secured solely by:
>> Liens existing on the date of the indenture (including those securing any
refinancing of debt underlying such liens);
>> Liens on any property existing at the time Bowater or a Restricted
Subsidiary acquires it, subject to certain limitations;
>> Liens in favor of Bowater or any wholly-owned Restricted Subsidiary;
>> Liens in favor of any governmental body to secure progress, advance or
other payments pursuant to any contract or provision of any statute;
>> Liens on property to secure all or part of the cost of acquiring,
substantially repairing or altering, constructing, developing or
substantially improving the property, or to secure all or part of such
property, subject to certain limitations;
>> Liens securing obligations issued by a State, territory or possession of
the United States or the District of Columbia to finance the acquisition
or construction of property, and on which the interest is not, in the
opinion of tax counsel or in accordance with an Internal Revenue Service
ruling, includible in gross income by reason of Section 103(a) of the
Internal Revenue Code of 1986, as amended; and
>> any extension, renewal or replacement (or successive extensions, renewals
or replacements), in whole or in part, of any Lien referred to in the
foregoing clauses, subject to certain limitations.
Bowater and its Restricted Subsidiaries may create, incur, assume or suffer to
exist Liens securing any Indebtedness without equally and ratably securing the
notes and other debt securities issued under the indenture, provided that the
aggregate amount of such Indebtedness and Attributable Debt with respect to Sale
and Lease-Back Transactions does not exceed 10% of Bowater's Consolidated Net
Tangible Assets.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS
Neither Bowater nor any Restricted Subsidiary may enter into any Sale and
Lease-Back Transactions with respect to any Principal Property unless the
aggregate amount of all Attributable Debt with respect to Sale and Lease-Back
Transactions plus the aggregate amount of Indebtedness secured by Liens incurred
33
without equally and ratably securing the notes pursuant to the subsection
entitled "Limitation on Liens" above, would not exceed 10% of Bowater's
Consolidated Net Tangible Assets. The foregoing restriction will not apply to,
and there shall be excluded from Attributable Debt in any computation described
herein or in the subsection entitled "Limitation on Liens" with respect to Sale
and Lease-Back Transactions if:
>> the lease in such Sale and Lease-Back Transaction is for a period,
including renewal rights, of three years or less;
>> Bowater or any Restricted Subsidiary, within 180 days after the Sale and
Lease-Back Transaction, applies an amount not less than the greater of
the net proceeds of the Sale and Lease-Back Transaction or the fair value
of the Principal Property at the time of the Sale and Lease-Back
Transaction to (a) the prepayment or retirement of Funded Debt of Bowater
or any of its Restricted Subsidiaries, subject to certain limitations, or
(b) the purchase of other property which will constitute Principal
Property, subject to certain limitations;
>> the lease in such Sale and Lease-Back Transaction secures or relates to
obligations issued by a State, territory or possession of the United
States or the District of Columbia to finance the acquisition or
construction of property, and on which the interest is not, in the
opinion of tax counsel or in accordance with an Internal Revenue Service
ruling, includible in gross income of the holder by reason of Section
103(a) of the Internal Revenue Code of 1986, as amended; or
>> such Sale and Lease-Back Transaction is entered into between Bowater and
a wholly-owned subsidiary or between wholly-owned subsidiaries.
DEFINITIONS FOR CERTAIN COVENANTS
"ATTRIBUTABLE DEBT" means, at the time any determination thereof is to be made,
with respect to any lease under which Bowater or any of its Restricted
Subsidiaries is liable, the total net amount of rent Bowater or its Restricted
Subsidiary must pay under such lease during its remaining term, using a discount
rate equal to the weighted average yield to maturity of the notes. By "net"
amount of rent we mean the rent payable by the lessee after excluding amounts
required to be paid on account of maintenance and repairs, insurance, taxes,
assessments, water rates and similar charges. In the case of any lease which is
terminable upon the payment of a penalty, such net amount shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be terminated.
"CONSOLIDATED NET TANGIBLE ASSETS" means, on the date of any determination, the
aggregate amount of assets, less applicable reserves and other properly
deductible items, after deducting:
>> all current liabilities, and
>> all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles,
all as set forth on the most recent quarterly balance sheet of Bowater and its
consolidated subsidiaries and computed in accordance with accounting principles
generally accepted in the United States.
"FUNDED DEBT" means
(1) all Indebtedness having a maturity of more than 12 months from the date as
of which the determination is made or having a maturity of 12 months or less but
by its terms being renewable or extendible beyond 12 months from such date at
the option of the borrower (excluding any amount thereof included in current
liabilities); and
(2) rental obligations payable more than 12 months from such date under leases
which are capitalized in accordance with accounting principles generally
accepted in the United States (such rental obligations to be included as Funded
Debt at the amount so capitalized and to be included for the purposes of the
definition of Consolidated Net Tangible Assets both as an asset and as Funded
Debt at the amount so capitalized).
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"INDEBTEDNESS" means, at any time, without duplication:
>> all obligations for borrowed money,
>> all obligations evidenced by bonds, debentures, notes or other similar
instruments, and
>> all obligations in respect of any letters of credit supporting any
Indebtedness of others and guarantees of Indebtedness of others.
"LIEN" means any mortgage, pledge, hypothecation, encumbrance, security
interest, statutory or other lien, or preference, priority or other security or
similar agreement or preferential arrangement of any kind or nature whatsoever,
including any conditional sale or other title retention agreement having
substantially the same economic effect as any of these.
"PRINCIPAL PROPERTY" means
(1) any mill, converting plant, manufacturing plant or other facility owned on
the date of the indenture or thereafter acquired by Bowater or any Restricted
Subsidiary that is located within the continental United States and the gross
book value (including related land and improvements thereon and all machinery
and equipment included therein without deduction of any depreciation reserves)
of which, on the date as of which the determination is being made, exceeds 1% of
Bowater's Consolidated Net Tangible Assets, and
(2) Timberlands, in each case other than:
>> any property which, in the opinion of Bowater's board of directors as
evidenced by a board resolution, is not of material importance to the
business conducted by Bowater and its Restricted Subsidiaries as an
entirety,
>> a portion of any property which, in the opinion of Bowater's board of
directors as evidenced by a board resolution, is not of material
importance to the use or operation of such property, or
>> any oil, gas or other minerals or mineral rights.
"REALTY SUBSIDIARY" means a subsidiary engaged primarily in the development and
sale or financing of real property.
"RESTRICTED SUBSIDIARY" means a subsidiary of Bowater (1) substantially all the
property of which is located, or substantially all the business of which is
carried on, within the continental United States and (2) which owns a Principal
Property, but does not include a Realty Subsidiary.
"SALE AND LEASE-BACK TRANSACTION" means any arrangement whereby Bowater or one
of its Restricted Subsidiaries has sold or transferred, or will sell or
transfer, property to a third party and has or will take back a lease pursuant
to which the rental payments are calculated to amortize the purchase price of
the property substantially over the useful life of such property.
"TIMBERLANDS" means any real property of Bowater or any Restricted Subsidiary
located within the continental United States which contains (or upon completion
of a growth cycle then in process is expected to contain) standing timber of a
commercial quantity and of merchantable quality, excluding, however, any such
real property which at the time of determination is held primarily for
development or sale and not primarily for the production of any lumber or other
timber products.
MERGERS AND SIMILAR EVENTS
Bowater may not consolidate with or merge into any other person or convey,
transfer or lease its properties and assets substantially as an entirety to any
person, nor may Bowater permit another entity to consolidate with or merge into
Bowater or convey, transfer or lease its properties and assets substantially as
an entirety to Bowater, unless:
>> If Bowater is not the principal survivor, the successor person is a
corporation, partnership or trust organized and validly existing under
the laws of the United States, any State or the District of Columbia;
35
>> the successor person expressly assumes our obligations on the notes and
under the indenture;
>> after giving effect to the transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of
Default, would occur and be continuing; and
>> either Bowater or the successor person takes all necessary steps to bring
any secured Indebtedness into compliance with the limitation on liens
covenant.
MODIFICATION AND WAIVER
Acting with the trustee, we may modify and amend the indenture upon receiving
the consent of the holders of 50% of the principal amount of the outstanding
original notes and exchange notes, taken together. However, we may not, without
the consent of each holder of the original notes and the exchange notes:
>> change the stated maturity of the principal or interest on a note;
>> reduce any amounts due on a note;
>> reduce the amount of principal payable upon acceleration of the maturity
of a note following a default;
>> change the place or currency of payment of a note;
>> impair your right to sue for payment;
>> reduce the percentage of holders of the notes whose consent is needed to
modify or amend the indenture;
>> reduce the percentage of holders of the notes whose consent is needed to
waive compliance with certain provisions of the indenture or to waive
certain defaults; or
>> modify any other aspect of the provisions dealing with modification and
waiver of the indenture.
Acting with the trustee, we may also modify and amend the indenture without your
consent in limited circumstances such as clarifications and changes that would
not adversely affect you.
The holders of 50% of the principal amount of the outstanding notes may waive,
before the time for compliance, our compliance with the restrictive covenants in
the indenture. The holders of at least a majority of the principal amount of the
outstanding notes may, on behalf of all holders of the notes, waive any past
default under the indenture, except:
>> a default in the payment of principal of, premium, if any, or interest on
the notes; and
>> a default in respect of a covenant or provision of the indenture that
cannot be modified or amended without the consent of the holder of each
outstanding note.
We generally will be entitled to set any day as a record date for the purpose of
determining the holders of outstanding notes that are entitled to vote or take
other action under the indenture in accordance with applicable laws. In limited
circumstances, the trustee will be entitled to set a record date for action by
you. If we or the trustee sets a record date for a vote or other action to be
taken by you, that vote or action may be taken only by persons who are holders
of outstanding notes on the record date and must be taken within 180 days
following the record date or a shorter period that we may specify (or as the
trustee may specify, if it sets the record date). We may shorten or lengthen
(but not beyond 180 days) this period from time to time.
You should consult your bank or broker for information on how approval may be
granted or denied if we seek to change the indenture or the notes or request a
waiver.
REPORTS
Bowater will deliver to the trustee (or make available through the SEC's EDGAR
system), within 5 days after it is required to file them with the SEC, the
annual and quarterly financial statements that it files with the SEC, including,
with respect to annual information only, a report thereon by its certified
independent public accountants. Even if Bowater is not required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Securities
36
Exchange Act of 1934, the indenture for the notes requires Bowater to continue
to file with, or furnish to the SEC and to provide to the trustee (or make
available through the SEC's EDGAR system):
(1) within 120 days after the end of each fiscal year, annual reports on Form
10-K (or any successor form) containing the information required to be contained
therein;
(2) within 60 days after the end of each of the first three fiscal quarters of
each fiscal year, reports on Form 10-Q (or any successor form); and
(3) promptly from time to time after the occurrence of an event required to be
reported by Form 8-K (or any successor form), a Form 8-K with respect to that
event;
provided, however, that Bowater will not be obligated to file such reports with
the SEC if the SEC does not permit such filings.
DEFEASANCE
FULL DEFEASANCE
If there is a change in federal tax law, as described below, we can legally
release ourselves from any payment or other obligations on the notes, which we
call full defeasance, if we put in place the following other arrangements,
subject to certain conditions, for repayment of the notes:
>> We must deposit in trust for your benefit a combination of money and U.S.
government or U.S. government agency notes or bonds that will generate
enough cash to make interest, principal and any other payments on the
notes on their various due dates.
>> There must be a change in current federal tax law or an Internal Revenue
Service ruling that lets us make the above deposit without causing you to
be taxed on the notes any differently than if we did not make the deposit
and instead repaid the notes ourselves. Under current federal tax law,
the deposit and our legal release from the notes would be treated as
though we took back the notes and gave you your share of the cash and
notes or bonds deposited in trust. In that event, you could recognize
gain or loss on the notes given back to us.
>> We must deliver to the trustee a legal opinion of our counsel confirming
the tax law change described above.
If we ever did accomplish full defeasance, as described above, you would have to
rely solely on the trust deposit for repayment on the notes. You could not look
to us for repayment in the unlikely event of any shortfall. Conversely, the
trust deposit would most likely be protected from claims of our lenders and
other creditors if we ever became bankrupt or insolvent.
COVENANT DEFEASANCE
Under current federal tax law, we can make the same type of deposit described
above and be released from some of the restrictive covenants in the notes. This
is called covenant defeasance. In that event, you would lose the protection of
those restrictive covenants but would gain the protection of having money and
securities set aside in trust to repay the notes. In order to achieve covenant
defeasance, we must do the following, subject to certain conditions:
>> We must deposit in trust for your benefit a combination of money and U.S.
government or U.S. government agency notes or bonds that will generate
enough cash to make interest, principal and any other payments on the
notes on their various due dates.
>> We must deliver to the trustee a legal opinion of our counsel confirming
that we may make the above deposit without causing you to be taxed on the
notes any differently than if we did not make the deposit and instead
repaid the notes ourselves.
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If we accomplish covenant defeasance, the following provisions of the indenture
and the notes would no longer apply:
>> Bowater's promises regarding conduct of its business previously described
above under the subsection entitled "Certain Covenants";
>> Bowater's obligations previously described above under the subsection
entitled "Reports";
>> the conditions that apply when Bowater merges or engages in similar
transactions, as previously described above under the subsection entitled
"Mergers and Similar Events"; and
>> the events of default relating to breach of certain covenants, certain
events in bankruptcy, insolvency or reorganization, and acceleration of
the maturity of other debt, described below under the subsection entitled
"Events of Default."
If we accomplish covenant defeasance, you can still look to us for repayment of
the notes if there were a shortfall in the trust deposit. In fact, if one of the
remaining events of default occurred (such as our bankruptcy) and the notes
became immediately due and payable, there may be such a shortfall. Depending on
the event causing the default, you may not be able to obtain payment of the
shortfall.
EVENTS OF DEFAULT
The term "event of default" means any of the following:
>> Bowater does not pay interest on a note within 30 days of its due date;
>> Bowater does not pay the principal or any premium on a note on its due
date;
>> Bowater fails to perform any restrictive covenant or other term of the
indenture for 60 days after receipt of notice of such breach and a
request to cure from the trustee or holders of at least 25% of the
principal amount of the notes outstanding; or
>> Bowater files for bankruptcy or certain other events of bankruptcy,
insolvency or reorganization occur.
REMEDIES IF AN EVENT OF DEFAULT OCCURS
If an event of default has occurred and has not been cured, the trustee or the
holders of 25% of the principal amount of the outstanding notes may declare the
entire principal amount of all the notes to be due and immediately payable. This
is called a declaration of acceleration of maturity. If an event of default
occurs because of certain events in bankruptcy, insolvency or reorganization,
the principal amount of all notes will be automatically accelerated, without any
action by the trustee or any holder. A declaration of acceleration of maturity
may be canceled by the holders of at least a majority in principal amount of the
notes if we get current in our payments (other than accelerated payments) and
all other events of default have been cured or waived.
Except in cases of default, where the trustee has some special duties, the
trustee is not required to take any action under the indenture at the request of
any holders unless the holders offer the trustee protection from expenses and
liability satisfactory to the trustee, which is called an indemnity. If
reasonable indemnity is provided, the holders of a majority of the principal
amount of the outstanding notes may direct the time, method and place of
conducting any lawsuit or other formal legal action seeking any remedy available
to the trustee. These majority holders may also direct the trustee in performing
any other action under the indenture.
Before you may bypass the trustee and bring your own lawsuit or other formal
legal action or take other steps to enforce your rights or protect your
interests relating to the notes, the following must occur:
>> you must give the trustee written notice that an event of default has
occurred and remains uncured;
>> the holders of 25% in principal amount of all outstanding notes must make
a written request that the trustee take action because of the default,
and must offer indemnity reasonably satisfactory to the trustee against
the cost and other liabilities of taking that action;
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>> the trustee must have not taken action for 60 days after the receipt of
the above notice and offer of indemnity; and
>> the holders of a majority in principal amount of all outstanding notes
must not have given the trustee any direction inconsistent with that
request during such 60 day period.
You are, however, entitled at any time to bring a lawsuit for the payment of
money due on your notes on or after their due date.
We will furnish to the trustee every year a written statement regarding our
performance of our obligations under the indenture and any default in such
performance.
THE TRUSTEE
The trustee's current address is 101 Barclay Street, Floor 8W, New York, New
York 10286. The trustee also serves as the registrar and transfer agent for our
common stock, is a lender under certain of our credit facilities and serves as a
trustee under other debt securities issued by our subsidiaries having an
aggregate principal amount of $919 million and in connection with certain of our
pension plans. BNY Capital Markets, Inc., an affiliate of the trustee, was an
initial purchaser of the original notes and purchased $17.4 million in principal
amount of the original notes.
The indenture provides that, except during the continuance of an event of
default, the trustee will perform only such duties as are specifically set forth
in the indenture. During the existence of an event of default, the trustee may
in its discretion proceed to protect and enforce its rights and the rights of
the note holders by such appropriate judicial proceedings as the trustee shall
deem necessary to protect and enforce such rights.
The indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the trustee, should it
become our creditor, to obtain payment of claims in certain cases or to
liquidate certain property received by it in respect of any such claim as
security or otherwise. The trustee is permitted to engage in other transactions
with us or any of our affiliates. If the trustee acquires any conflicting
interest (as defined in the indenture or in the Trust Indenture Act), it must
eliminate such conflict or resign.
GOVERNING LAW
The indenture and the notes will be governed by and construed in accordance with
the laws of the State of New York.
BOOK-ENTRY, DELIVERY AND FORM OF SECURITIES
The notes will be represented by one or more global notes (the "Global Notes")
in definitive form. The Global Notes will be deposited on the issue date with,
or on behalf of, The Depository Trust Company ("DTC") and registered in the name
of Cede & Co., as nominee of DTC (referred to in this prospectus as the "Global
Note Holder"). The Global Notes will be subject to certain restrictions on
transfer and will bear the legend regarding these restrictions set forth under
the heading "Notice to Investors." DTC will maintain the notes in denominations
of $1,000 and integral multiples thereof through its book-entry facilities.
DTC has advised us as follows:
DTC is a limited-purpose trust company that was created to hold securities for
its participating organizations, including the Euroclear System and Clearstream
Banking, Societe Anonyme, Luxembourg (collectively, the "Participants" or the
"Depositary's Participants"), and to facilitate the clearance and settlement of
transactions in these securities between Participants through electronic
book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the initial
purchasers of the original notes), banks and trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "Depositary's Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Persons who are not Participants may
39
beneficially own securities held by or on behalf of DTC only through the
Depositary's Participants or the Depositary's Indirect Participants. Pursuant to
procedures established by DTC, ownership of the notes will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by DTC (with respect to the interests of the Depositary's Participants) and the
records of the Depositary's Participants (with respect to the interests of the
Depositary's Indirect Participants).
The laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer the notes will be limited to that extent.
So long as the Global Note Holder is the registered owner of any notes, the
Global Note Holder will be considered the sole holder of outstanding notes
represented by such Global Notes under the indenture. Except as provided below,
owners of notes will not be entitled to have notes registered in their names and
will not be considered the owners or holders thereof under the indenture for any
purpose, including with respect to the giving of any directions, instructions or
approvals to the trustee thereunder. Neither the issuer of the notes nor the
trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to such notes.
Payments in respect of the principal of, premium, if any, and interest on any
notes registered in the name of the Global Note Holder on the applicable record
date will be payable by the trustee to or at the direction of the Global Note
Holder in its capacity as the registered holder under the indenture. Under the
terms of the indenture, the issuer of the notes and the trustee may treat the
persons in whose names any notes, including the Global Notes, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the issuer of the notes nor
the trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of notes (including principal, premium, if
any, and interest). We believe, however, that it is currently the policy of DTC
to immediately credit the accounts of the relevant Participants with such
payments, in amounts proportionate to their respective beneficial interests in
the relevant security as shown on the records of DTC. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
Subject to certain conditions, any person having a beneficial interest in the
Global Notes may, upon request to the trustee and confirmation of such
beneficial interest by the Depositary or its Participants or Indirect
Participants, exchange such beneficial interest for notes in definitive form.
Upon any such issuance, the trustee is required to register such notes in the
name of, and cause the same to be delivered to, such person or persons (or the
nominee of any thereof). Such notes would be issued in fully registered form. In
addition, if (1) we notify the trustee in writing that DTC is no longer willing
or able to act as a depositary and we are unable to locate a qualified successor
within 90 days or (2) we, at our option, notify the trustee in writing that we
elect to cause the issuance of notes in definitive form under the indenture,
then, upon surrender by the Global Note Holder of its Global Note, notes in such
form will be issued to each person that such Global Note Holder and DTC identify
as being the beneficial owner of the related notes.
Neither Bowater nor the trustee will be liable for any delay by the Global Note
Holder or DTC in identifying the beneficial owners of notes and the issuer of
the notes and the trustee may conclusively rely on, and will be protected in
relying on, instructions from the Global Note Holder or DTC for all purposes.
The information in this section concerning DTC, Euroclear and Clearstream and
their book-entry systems has been obtained from sources that we believe to be
reliable, but we take no responsibility for the accuracy thereof.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion addresses the material U.S. federal income tax
considerations relating to the Exchange Offer and the purchase, ownership and
disposition of the notes. This discussion is based on the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the applicable treasury
regulations promulgated or proposed under the Code, judicial authority and
current administrative rulings and practice. All of these authorities may change
without notice, possibly on a retroactive basis. This summary deals only with
holders that will hold notes as capital assets within the meaning of Section
1221 of the Code. It does not address tax considerations applicable to investors
that may be subject to special tax rules, such as banks and other financial
institutions; tax-exempt organizations; insurance companies; traders or dealers
in securities or currencies; custodians, nominees or similar financial
intermediaries holding notes for others; or persons that will hold notes as a
position in a hedging transaction, straddle or conversion transaction for tax
purposes. This summary does not discuss the tax consequences of any conversion
of currency into or out of the U.S. dollar as such a conversion relates to the
purchase, ownership or disposition of the notes. We have not sought any ruling
from the Internal Revenue Service (IRS) with respect to the statements made and
the conclusions reached in the following summary. There can be no assurance that
the IRS will agree with such statements and conclusions.
PROSPECTIVE INVESTORS IN THE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF
ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX
TREATY.
Because the exchange notes will not differ materially in kind or extent from the
original notes, your exchange of original notes for exchange notes will not
constitute a taxable disposition of the original notes for United States federal
income tax purposes. As a result, you will not recognize income, gain or loss on
your exchange of original notes for exchange notes, your holding period for the
exchange notes will generally include your holding period for original notes,
your adjusted tax basis on the exchange notes will generally be the same as your
adjusted tax basis in your original notes and all of the United States federal
income tax consequences associated with owning the original notes should
continue to apply to the exchange notes.
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PLAN OF DISTRIBUTION
Generally, exchange notes will be distributed in exchange for the original notes
pursuant to the exchange offer as described above under the heading "The
Exchange Offer."
We have not entered into any arrangement or understanding with any person to
distribute the exchange notes to be received in the exchange offer, and to the
best of our knowledge and belief, each person participating in the exchange
offer is acquiring the exchange notes in its ordinary course of business and has
no arrangement or understanding with any person to participate in the
distribution of the exchange notes to be received in the exchange offer.
The staff of the SEC has taken the position that any broker-dealer that elects
to exchange original notes that were acquired by such broker-dealer for its own
account as a result of market-making or other trading activities for exchange
notes in the exchange offer may be deemed to be an "underwriter" within the
meaning of the Securities Act and must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of exchange
notes (other than a resale of an unsold allotment resulting from the initial
offering of the original notes).
Each broker-dealer that receives exchange notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the exchange notes. Under current positions taken
by the staff of the SEC, broker-dealers may use this prospectus, as it may be
amended or supplemented from time to time, in connection with the resale of
exchange notes received in exchange for original notes where the broker-dealer
acquired the original notes as a result of market-making activities or other
trading activities. To the extent a broker-dealer participates in the exchange
offer and so notifies us, we have agreed to keep the registration statement
containing this prospectus continually effective and to make this prospectus, as
amended or supplemented, available to the broker-dealer for use in connection
with any such resale for a period of up to 180 days after the registration
statement containing this prospectus is declared effective (subject to extension
in certain circumstances). We will promptly send additional copies of this
prospectus and any amendment or supplement to any broker-dealer that requests
the documents in the letter of transmittal.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers or any other persons. Broker-dealers may sell exchange notes
received by them for their own account pursuant to the exchange offer from time
to time in one or more transactions:
>> in the over-the-counter market;
>> in negotiated transactions;
>> through the writing of options on the exchange notes; or
>> through a combination of the above methods of resale.
Any such sale may be at market prices prevailing at the time of resale, at
prices related to the prevailing market prices or at negotiated prices.
Broker-dealers may resell exchange notes directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any broker-dealer and/or the purchasers of the exchange notes.
Any broker-dealer that resells exchange notes that were received by it for its
own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of the exchange notes may be deemed to be
"underwriters" within the meaning of the Securities Act and any profit on any
resale of exchange notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The letter of transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
42
We have agreed to pay all expenses incident to the exchange offer, other than
commissions and concessions of any broker-dealer. We also will provide
indemnification against specified liabilities, including liabilities that may
arise under the Securities Act, to broker-dealers that exchange original notes
acquired for their own accounts as a result of market-making activities or other
trading activities in the exchange offer for exchange notes.
By its acceptance of the exchange offer, any broker-dealer that receives
exchange notes pursuant to the exchange offer agrees to notify us before using
the prospectus in connection with the sale or transfer of exchange notes. The
broker-dealer further acknowledges and agrees that, upon receipt of notice from
us of the happening of any event which:
>> makes any statement in this prospectus, the registration statement
containing this prospectus or any document incorporated by reference in
the registration statement untrue in any material respect;
>> requires the making of any changes in the prospectus to make the
statements in the prospectus, the registration statement containing this
prospectus or any document incorporated by reference in the registration
statement not misleading; or
>> may impose upon us disclosure obligations that may have a material
adverse effect on us,
which notice we agree to deliver promptly to the broker-dealer, the
broker-dealer will suspend use of the prospectus until we have notified the
broker-dealer that delivery of the prospectus may resume and have furnished
copies of any amendment or supplement to the prospectus to the broker-dealer.
LEGAL MATTERS
Certain legal matters with respect to the validity of the notes offered hereby
will be passed upon for us by Harry F. Geair, our Vice President - General
Counsel and Secretary. As of the date of this memorandum, Mr. Geair beneficially
owns approximately 73,756 shares of Bowater Incorporated common stock (including
shares underlying currently exercisable stock options), stock appreciation
rights with respect to 27,600 shares of Bowater Incorporated common stock and
phantom stock units with respect to approximately 267 shares of Bowater
Incorporated common stock.
EXPERTS
The consolidated financial statements and schedule of Bowater Incorporated and
subsidiaries as of December 31, 2002 and 2001, and for each of the years in the
three-year period ended December 31, 2002, have been incorporated by reference
herein in reliance upon the reports of KPMG LLP, independent accountants,
incorporated by reference herein and upon the authority of that firm as experts
in accounting and auditing. The audit reports covering the December 31, 2002
consolidated financial statements contain an explanatory paragraph that refers
to Bowater's adoption of the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," and SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" effective
January 1, 2002.
43
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS TO YOU OTHER THAN THE INFORMATION
CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED INFORMATION OR
REPRESENTATIONS. THIS PROSPECTUS DOES NOT OFFER TO EXCHANGE EXCHANGE NOTES FOR
ORIGINAL NOTES OR SOLICIT AN OFFER TO EXCHANGE ORIGINAL NOTES FOR EXCHANGE NOTES
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CURRENT
ONLY AS OF THE DATE ON THE COVER PAGE. BY DELIVERING THIS PROSPECTUS, WE DO NOT
IMPLY THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION CONTAINED IN THIS
PROSPECTUS OR IN OUR AFFAIRS SINCE THAT DATE.
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Where You Can Find More Information ii
About Bowater Incorporated ..............
Important Notice to Readers .................. ii
Forward-Looking Statements ................... iii
Market Share and Industry Data ............... iii
Prospectus Summary ........................... 1
Risk Factors ................................. 9
Use of Proceeds .............................. 14
Capitalization ............................... 15
Selected Financial Data ...................... 16
The Exchange Offer ........................... 19
Description of the Exchange Notes ............ 31
U.S. Federal Income Tax Considerations ....... 41
Plan of Distribution ......................... 42
Legal Matters ................................ 43
Experts ...................................... 43
PROSPECTUS
August , 2003
$400,000,000
[BOWATER LOGO OMITTED]
BOWATER INCORPORATED
Offer to Exchange 6 1/2% Notes due 2013 for
6 1/2% Notes due 2013, which have been
registered under the Securities Act of 1933
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS & DIRECTORS.
Section 145 of the Delaware General Corporation Law provides for indemnification
of directors and officers against any legal liability (other than liability
arising from derivative suits) if the officer or director acted in good faith
and in a manner that he reasonably believed to be in or not opposed to the best
interests of the corporation. In criminal actions, the officer or director must
also have had no reasonable cause to believe that his conduct was unlawful. A
corporation may indemnify an officer or director in a derivative suit if the
officer or director acted in good faith and in a manner that he reasonably
believed to be in or not opposed to the best interest of the corporation unless
the officer or director is found liable to the corporation. However, if the
Court of Chancery or the court in which such action or suit was brought
determines that the officer or director is fairly and reasonably entitled to
indemnity, then the Court of Chancery or such other court may permit indemnity
for such officer or director to the extent it deems proper. Delaware law
requires the corporation to indemnify directors and officers against expenses
they reasonably incur in defending an action, suit or proceeding described above
to the extent that their defense is successful.
The Registrant's Restated Certificate of Incorporation provides generally that
the Registrant shall indemnify its present and past directors and officers to
the fullest extent permitted by the laws of Delaware as they may exist from time
to time. Directors and officers of the Registrant and its subsidiaries are
indemnified generally against expenses reasonably incurred in connection with
proceedings, whether civil or criminal. The Registrant's Restated Certificate of
Incorporation also provides that indemnification thereunder is not exclusive.
The Registrant's Restated Certificate of Incorporation provides that, to the
full extent permitted by Delaware law, directors of the Registrant shall not be
held personally liable to the Registrant or its stockholders for monetary
damages arising from certain breaches of their fiduciary duties. The provision
does not insulate directors from personal liability for (i) breaches of their
duty of loyalty to the Registrant or its stockholders, (ii) acts or omissions
not taken in good faith or that involve intentional misconduct or knowing
violation of law, (iii) transactions in which the director derives any improper
personal benefit or (iv) unlawfully voting to pay dividends or to repurchase to
redeem stock.
The Registrant maintains insurance policies providing for indemnification of
directors and officers and for reimbursement to the Registrant for monies which
it may pay as indemnity to any director or officer, subject to the conditions
and exclusions of the policies and specified deductible provisions.
II-1
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
EXHIBIT DESCRIPTION
2.1 Arrangement Agreement dated as of April 1, 2001, by and between
Bowater Incorporated and Alliance Forest Products Inc. (incorporated
by reference to Exhibit 2.1 to Bowater Incorporated's Quarterly
Report on Form 10-Q for the period ending March 31, 2001, File No.
1-8712).
4.1 Restated Certificate of Incorporation of Bowater Incorporated, as
amended.
4.2 Certificate of Designation of the special voting stock of Bowater
Incorporated (incorporated by reference to Exhibit 4.11 to Amendment
No. 1 to Bowater Incorporated's Registration Statement No. 333-
57839).
4.3 Bylaws of Bowater Incorporated amended and restated as of May 20,
1998 (incorporated by reference to Exhibit 4.10 to Bowater
Incorporated's Registration Statement No. 333-57839).
4.4 Agreement pursuant to S-K Item 601(b)(4)(iii)(A) to provide the
Commission upon request copies of certain other instruments with
respect to long-term debt not being registered where the amount of
securities authorized under each such instrument does not exceed 10%
of the total assets of the registrant and its subsidiaries on a
consolidated basis (incorporated by reference to Exhibit 4.3 to
Bowater Incorporated's Registration Statement No. 2-93455).
4.5 Purchase Agreement dated June 16, 2003 by and between Bowater
Incorporated and UBS Securities LLC as Representative of the Several
Initial Purchasers named in Schedule I thereto (incorporated by
reference to Exhibit 4.1 to Bowater Incorporated's Quarterly Report
on Form 10-Q for the period ended June 30, 2003, File No. 1-8712 (the
"June 2003 10-Q")).
4.6 Indenture dated June 19, 2003 by and between Bowater Incorporated, as
Issuer, and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 4.2 to the June 2003 10-Q.
4.7 Registration Rights Agreement dated June 19, 2003 by and among
Bowater Incorporated, as Issuer, and UBS Securities LLC, J.P. Morgan
Securities Inc., Scotia Capital (USA) Inc., BMO Nesbitt Burns Corp.,
Wachovia Securities, Inc., SunTrust Capital Markets, Inc., TD
Securities (USA) Inc., BNY Capital Markets, Inc. and Banc of America
Securities LLC, as Initial Purchasers (incorporated by reference to
Exhibit 4.3 to the June 2003 10-Q.
4.8 Form of Original Note and Exchange Note (included in Exhibit 4.6
hereto).
4.9 Purchase Agreement dated as of October 31, 2001 by and among Bowater
Canada Finance Corporation, Bowater Incorporated, Goldman, Sachs &
Co., and J.P. Morgan Securities, Inc., as the representative of the
several purchasers named in Schedule I thereto (incorporated by
reference to Exhibit 10.2 to Bowater Incorporated's Quarterly Report
on Form 10-Q for the period ended September 30, 2001, File No. 1-8712
(the "September 2001 Form 10-Q")).
4.10 Indenture dated as of October 31, 2001 by and among Bowater Canada
Finance Corporation (as Issuer), Bowater Incorporated (as Guarantor)
and The Bank of New York (as Trustee) (incorporated by reference to
Exhibit 10.3 to the September 2001 Form 10-Q).
4.11 Exchange and Registration Rights Agreement dated as of November 6,
2001 by and among Bowater Canada Finance Corporation, Bowater
Incorporated, Goldman, Sachs & Co., and J.P. Morgan Securities, Inc.
as representative of the several purchasers named in Schedule I to
the Purchase Agreement (incorporated by reference to Exhibit 10.4 to
the September 2001 Form 10-Q).
4.12 Forms of 7.95% Notes due 2011 of Bowater Canada Finance Corporation
and Guarantees thereof by Bowater Incorporated (included in Exhibit
4.10 hereto).
5.1 Opinion of Harry F. Geair, Vice President -- General Counsel and
Secretary to Bowater Incorporated.
12.1 Statement regarding Computation of Ratio of Earnings to Fixed
Charges.
23.1 Consent of Independent Auditors.
23.2 Consent of Harry F. Geair, Vice President -- General Counsel and
Secretary to Bowater Incorporated (included in Exhibit 5.1).
24.1 Power of Attorney.
25.1 Statement of Eligibility and Qualification on Form T-1 of The Bank of
New York, as trustee of the 6 1/2% Notes due 2013 of the Registrant.
99.1 Form of Letter of Transmittal with respect to the Exchange Offer.
99.2 Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
99.3 Form of Notice of Guaranteed Delivery with respect to the Exchange
Offer.
99.4 Form of Letter to Registered Holders and Depository Trust Company
Participants.
II-2
99.5 Form of Letter to Beneficial Holders with respect to the Exchange
Offer.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii)To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into this prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other
II-3
equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Greenville, State of
South Carolina, on August 20, 2003.
BOWATER INCORPORATED
By: /s/ William G. Harvey
----------------------------------
William G. Harvey
Vice President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Arnold M. Nemirow Chairman of the Board, President and Chief August 20, 2003
------------------------------------
Arnold M. Nemirow Executive Officer (principal executive officer)
/s/ David G. Maffucci Executive Vice President and Chief Financial August 20, 2003
------------------------------------
David G. Maffucci Officer (principal financial officer)
/s/ Michael F. Nocito Vice President and Controller August 20, 2003
------------------------------------
Michael F. Nocito
* Director August 20, 2003
------------------------------------
Francis J. Aguilar
* Director August 20, 2003
------------------------------------
Richard Barth
* Director August 20, 2003
------------------------------------
Gordon D. Giffin
* Director August 20, 2003
------------------------------------
Charles J. Howard
* Director August 20, 2003
------------------------------------
L. Jacques Menard
* Director August 20, 2003
------------------------------------
John A. Rolls
* Director August 20, 2003
------------------------------------
Arthur R. Sawchuk
* Director August 20, 2003
------------------------------------
Togo D. West, Jr.
* Harry F. Geair, by signing his name hereto, does sign this document on behalf
of the persons indicated above pursuant to powers of attorney duly executed by
such persons that are filed herewith as Exhibit 24.
By: /s/ Harry F. Geair
----------------------------------------
Harry F. Geair, Attorney-in-Fact
II-5
EXHIBIT INDEX
EXHIBIT DESCRIPTION
2.1 Arrangement Agreement dated as of April 1, 2001, by and between
Bowater Incorporated and Alliance Forest Products Inc. (incorporated
by reference to Exhibit 2.1 to Bowater Incorporated's Quarterly
Report on Form 10-Q for the period ending March 31, 2001, File No.
1-8712).
4.1 Restated Certificate of Incorporation of Bowater Incorporated, as
amended.
4.2 Certificate of Designation of the special voting stock of Bowater
Incorporated (incorporated by reference to Exhibit 4.11 to Amendment
No. 1 to Bowater Incorporated's Registration Statement No. 333-
57839).
4.3 Bylaws of Bowater Incorporated amended and restated as of May 20,
1998 (incorporated by reference to Exhibit 4.10 to Bowater
Incorporated's Registration Statement No. 333-57839).
4.4 Agreement pursuant to S-K Item 601(b)(4)(iii)(A) to provide the
Commission upon request copies of certain other instruments with
respect to long-term debt not being registered where the amount of
securities authorized under each such instrument does not exceed 10%
of the total assets of the registrant and its subsidiaries on a
consolidated basis (incorporated by reference to Exhibit 4.3 to
Bowater Incorporated's Registration Statement No. 2-93455).
4.5 Purchase Agreement dated June 16, 2003 by and between Bowater
Incorporated and UBS Securities LLC as Representative of the Several
Initial Purchasers named in Schedule I thereto (incorporated by
reference to Exhibit 4.1 to Bowater Incorporated's Quarterly Report
on Form 10-Q for the period ended June 30, 2003, File No. 1-8712 (the
"June 2003 10-Q)).
4.6 Indenture dated June 19, 2003 by and between Bowater Incorporated, as
Issuer, and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 4.2 to the June 2003 10-Q).
4.7 Registration Rights Agreement dated June 19, 2003 by and among
Bowater Incorporated, as Issuer, and UBS Securities LLC, J.P. Morgan
Securities Inc., Scotia Capital (USA) Inc., BMO Nesbitt Burns Corp.,
Wachovia Securities, Inc., SunTrust Capital Markets, Inc., TD
Securities (USA) Inc., BNY Capital Markets, Inc. and Banc of America
Securities LLC, as Initial Purchasers (incorporated by reference to
Exhibit 4.3 to the June 2003 10-Q).
4.8 Form of Original Note and Exchange Note (included in Exhibit 4.6
hereto).
4.9 Purchase Agreement dated as of October 31, 2001 by and among Bowater
Canada Finance Corporation, Bowater Incorporated, Goldman, Sachs &
Co., and J.P. Morgan Securities, Inc., as the representative of the
several purchasers named in Schedule I thereto (incorporated by
reference to Exhibit 10.2 to Bowater Incorporated's Quarterly Report
on Form 10-Q for the period ended September 30, 2001, File No. 1-8712
(the "September 2001 Form 10-Q")).
4.10 Indenture dated as of October 31, 2001 by and among Bowater Canada
Finance Corporation (as Issuer), Bowater Incorporated (as Guarantor)
and The Bank of New York (as Trustee) (incorporated by reference to
Exhibit 10.3 to the September 2001 Form 10-Q).
4.11 Exchange and Registration Rights Agreement dated as of November 6,
2001 by and among Bowater Canada Finance Corporation, Bowater
Incorporated, Goldman, Sachs & Co., and J.P. Morgan Securities, Inc.
as representative of the several purchasers named in Schedule I to
the Purchase Agreement (incorporated by reference to Exhibit 10.4 to
the September 2001 Form 10-Q).
4.12 Forms of 7.95% Notes due 2011 of Bowater Canada Finance Corporation
and Guarantees thereof by Bowater Incorporated (included in Exhibit
4.10 hereto).
5.1 Opinion of Harry F. Geair, Vice President -- General Counsel and
Secretary to Bowater Incorporated.
12.1 Statement regarding Computation of Ratio of Earnings to Fixed
Charges.
23.1 Consent of Independent Auditors.
23.2 Consent of Harry F. Geair, Vice President -- General Counsel and
Secretary to Bowater Incorporated (included in Exhibit 5.1).
24.1 Power of Attorney.
25.1 Statement of Eligibility and Qualification on Form T-1 of The Bank of
New York, as trustee of the 6 1/2% Notes due 2013 of the Registrant.
99.1 Form of Letter of Transmittal with respect to the Exchange Offer.
99.2 Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
99.3 Form of Notice of Guaranteed Delivery with respect to the Exchange
Offer.
99.4 Form of Letter to Registered Holders and Depository Trust Company
Participants.
99.5 Form of Letter to Beneficial Holders with respect to the Exchange
Offer.
II-6