Domtar Corporation reports on status of asset-backed commercial paper holdings



    TICKER SYMBOL
    UFS (NYSE, TSX)

    MONTREAL, Sept. 7 /CNW Telbec/ - In light of the current disruption of
credit markets, particularly for third party asset-backed commercial paper
("ABCP"), Domtar Corporation is providing the following update.
    The Company and its subsidiaries, including Domtar Inc., have no holdings
of ABCP.
    Domtar Corporation's Canadian pension funds have approximately
CDN $420 million (of which approximately $308 million is held by Domtar Inc.'s
Canadian pension funds) invested in multiple ABCP conduits that are subject to
the interim arrangement of the "Montreal Proposal". These investments are
primarily rated Under Review - Developing at R-1 (high) or AAA by DBRS.
    Pursuant to the Montreal Proposal, banks and major investors are
negotiating restructuring proposals with respect to such ABCP conduits
intended to minimize potential losses for investors. These discussions are at
a preliminary stage, and the outcome and the effect it would have on the value
of the Company's Canadian pension fund assets have yet to be determined.
    The Company does not expect liquidity issues to affect the pension funds
since pension fund obligations are primarily long-term in nature. Losses in
the pension fund investments, if any, would result in future increased
contributions by the Company or its Canadian subsidiaries. Additional
contributions to theses pension funds would be required to be paid over a
5-year period. Losses, if any, would also impact operating earnings over a
longer period of time and immediately increase liabilities and reduce equity.
    The Company continues to monitor the ABCP situation closely.

    Domtar Corporation (NYSE/TSX: UFS) is the largest integrated producer of
uncoated freesheet paper and one of the largest manufacturers of papergrade
market pulp in North America. The Company designs, manufactures, markets and
distributes a wide range of business, commercial printing, publication as well
as technical and specialty papers with recognized brands such as First
Choice(R), Domtar Microprint(R), Windsor Offset(R), Cougar(R) as well as its
full line of environmentally and socially responsible papers, Domtar
EarthChoice(R). Domtar owns and operates Domtar Distribution Group, an
extensive network of strategically-located paper distribution facilities.
Domtar also produces lumber and other specialty and industrial wood products.
The Company employs nearly 14,000 people. To learn more, visit www.domtar.com




For further information:

For further information: Michel A. Rathier, Vice-President, Corporate
Communications, (514) 848-5103, michel.rathier@domtar.com

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Domtar Corporation

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