Montreal, Quebec, Canada, 24 March 2008 -- /PRNewswire/ -- AbitibiBowater Inc. has entered into a definitive agreement with Fairfax Financial Holdings Limited (TSX and NYSE: FFH) for an investment by Fairfax and its designated subsidiaries in AbitibiBowater of USD 350 million in the form of unregistered convertible debentures. This transaction, which is part of the company's previously announced USD 1.4 billion refinancing plan, is expected to address upcoming debt maturities and general liquidity needs of its Abitibi-Consolidated Inc. subsidiary. There is no financing condition to the obligations of Fairfax to fund the transaction.

The USD 350 million of convertible debentures is convertible into AbitibiBowater common shares at USD 10.00 per share, carries an 8% cash coupon, has an ability for the company to pay interest in the form of additional "pay-in-kind" debentures at a rate of 10%, and has a subsidiary guarantee. The debentures have a maturity of 5 years and are noncallable.

The transaction, which is scheduled to close on 31 March 2008, is subject to certain conditions, including the receipt of various lender consents and the closing of the other components of the company's USD 1.4 billion refinancing plan. Under the Fairfax purchase agreement, Fairfax will have the right to appoint two directors to the board of directors of the company.

In connection with the approval of the Fairfax transaction by the board of directors of AbitibiBowater, and pursuant to an exception provided by the New York Stock Exchange stockholder approval policy, the audit committee of AbitibiBowater determined that a delay in the transaction to secure stockholder approval of the issuance of the convertible debentures, given the pending maturities of Abitibi-Consolidated's 01 April and 20 June 2008 senior notes, and the current state of the credit and capital markets, could seriously jeopardize the financial viability of AbitibiBowater. Accordingly, AbitibiBowater's board of directors and audit committee expressly approved the company's decision not to seek stockholder approval of the issuance of the convertible debentures to Fairfax. The New York Stock Exchange has accepted AbitibiBowater's reliance on the exception and the company, in reliance upon this exception, is mailing a letter to all stockholders notifying them of its intention to issue the convertible debentures without their prior approval.

For AbitibiBowater, Troutman Sanders LLP acted as legal advisor to the company and Cravath, Swaine & Moore LLP acted as legal advisor to the company's independent directors. On behalf of Fairfax, Shearman & Sterling LLP and Torys LLP acted as co-legal advisors.

About AbitibiBowater

AbitibiBowater produces a wide range of newsprint, commercial printing papers, market pulp, and wood products. It is the eighth largest publicly traded pulp and paper manufacturer in the world. Following the required divestiture agreed to with the U.S. Department of Justice, AbitibiBowater will own or operate 27 pulp and paper facilities and 35 wood products facilities located in the United States, Canada, the United Kingdom, and South Korea. Marketing its products in more than 90 countries, AbitibiBowater is also among the world's largest recyclers of newspapers and magazines, and has more third-party certified sustainable forest land than any other company in the world. AbitibiBowater's shares trade under the stock symbol ABH on both the New York Stock Exchange and the Toronto Stock Exchange.

About Fairfax

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

Source: AbitibiBowater Inc.