Moody's eyes Domtar for downgrade

Moody's Investors Service said it placed Domtar Corp.'s senior unsecured rating on review for downgrade.

The review follows the company's announcement it entered a combination under which the unrated Paper Excellence group of companies will acquire Domtar in an all-cash transaction that represents an enterprise value of about $3 billion.

"The review for downgrade was prompted by the possibility that Domtar's credit profile will weaken once acquired by Paper Excellence, a private company with an unknown strategy for Domtar and uncertain financial policy" said Ed Sustar, a Moody's senior vice president, in a press release.

The review will cover Domtar's capital structure and post-closing credit metrics, in the event the change of control in Domtar's bonds is triggered, Domtar's ability to maintain good liquidity and the possible legal and/or implicit credit support to be provided by the Paper Excellence group of companies, Moody’s said.

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