UPDATE 2-AbitibiBowater gets court OK for DIP financing

* Gets court approval for Abitibi-Consolidated DIP

* Says DIP will support company's business continuity

* Union upset with pension payment ruling

(Adds pension ruling, All figures in U.S. dollars, unless noted)

TORONTO, May 7 (Reuters) - North America's largest newsprint maker, AbitibiBowater Inc. ABH.TO (ABWTQ.PK), won Canadian court approval on Thursday for $100 million in financing to get its Abitibi-Consolidated unit through its bankruptcy reorganization.

Last month, AbitibiBowater crumpled under its overwhelming debt-load and weak demand for newsprint and lumber, forcing it to file for bankruptcy protection in Canada and the United States when some of its lenders rejected a recapitalization plan.

The order from the the Quebec Superior Court in Canada allows Abitibi-Consolidated to enter into a loan agreement with Bank of Montreal for debtor-in-possession financing, which will be guaranteed by Investissement Quebec -- the province's investment agency.

AbitibiBowater has already won court approval and entered into financing commitments with Fairfax Financial Holdings Ltd (FFH.TO) and Avenue Management LLC for debtor-in-possession financing totaling about $200 million for its Bowater unit, which is subject to a Chapter 11 bankrupcty filing.

The company said the Abitibi-Consolidated DIP Agreement will support AbitibiBowater's business continuity by providing additional short-term liquidity while the company continues to develop its restructuring plan.

The Quebec judge also allowed the company to suspend special payments it was making to reduce the pension's unfunded liability, a ruling that immediately drew fire from its largest Canadian union.

"Failure to make pension payments will only make a company's unfunded liability grow, setting the stage for larger pension plan deficits," said Dave Coles, president of the Communications, Energy and Paperworkers Union.

The union will not appeal the ruling, but is worried that the Abitibi case is the start of a major battle with the federal government over how to protect pensions as more companies are forced into creditor protection.

Unlike with the country's auto industry, Ottawa has taken a largely hands-off approach to efforts by struggling forestry firms to reorganize their finances. ($1= $1.16 Canadian) (Reporting by Euan Rocha, Allan Dowd, editing by Frank McGurty)