S&P: Domtar on developing watch

Standard & Poor's said it placed its ratings on Domtar Inc., including the BB- long-term corporate credit rating, on CreditWatch with developing implications, after the company announced its plan to combine with the fine paper business of Weyerhaeuser Co. (BBB/stable/A-2).

S&P said that the companies have proposed a two-step reverse takeover, whereby Weyerhaeuser will transfer 10 of its pulp and paper mills and two of its sawmills to a new entity in exchange for a cash payment of $1.35 billion and shares that will be distributed to Weyerhaeuser shareholders.

The agency added that the CreditWatch will be resolved after an assessment of the company's financial policies and an evaluation of the expected improvement in Domtar's business profile relative to a financial profile that will remain weak.

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