The Quebec government was accused Tuesday of risking thousands of AbitibiBowater jobs and the company's survival by threatening to withdraw its $100 million US loan guarantee unless a bankruptcy court accepts precedent-setting terms for its involvement.

The most contentious clause would require the appointment of the auditing firm Raymond Chabot as court-appointed monitor to ensure public funds are returned if repayment is not made by Nov. 1.

At a hearing in Montreal,lawyer Gerald Kandestin urged Justice Clement Gascon to reject the clause because it would add unnecessary costs and set a dangerous precedent for all future providers of debtor financing.

"It just doesn't look right," said Kandestin, who represents a construction firm owed $12 million for building a biomass boiler in Fort Francis, Ont.  "Is this Canada or Santo Domingo?"

The clause visibly angered Gascon and confounded the current monitor, Ernst & Young, which said it has never seen such a requirement in Canada.

Fred Myers, who represents unsecured creditors owed $3 billion, said Quebec's requirement doesn't make sense since court officers are neutral and the government's money is the most secure.

Investissement Québec lawyer Patrice Benoit called the clause essential because it ensures that public funds are reimbursed. He said the agency is unaccustomed to being involved in debtor financing.

Earlier, the court was told AbitibiBowater's Canadian subsidiary, Abitibi-Consolidated, needs the injection of government-backed financing to provide stability to the forestry company.

A U.S. bankruptcy court has already approved a separate $200 million US debtor in possession financing for Bowater, the company's U.S. subsidiary.

Alex Morrison of Ernst & Young said the Montreal-based forestry and newspaper giant's tenuous financial condition has raised concerns among suppliers, customers and employees.

"It is very important to customers, suppliers and employees that there is stability brought to this organization," he told the judge, calling the debtor in possession financing reasonable in the current economic and credit environment.

Without the provincially-backed financing, Abitibi-Consolidated would have an uncomfortable amount of cash to pay its $45 million of weekly expenditures, he said.

Abitibi expects to initially draw $30 million US of the financing and interest and fees will reduce the available proceeds to $25 million.

Only $87.5 million US of the full $100 million is available as a cash infusion. The company will pay 4.75 per cent interest on its loan and $4.4 million of fees to the Quebec government and Bank of Montreal, which is providing the loan.