S&P rates Domtar notes, debentures B+

Standard & Poor's said it affirmed the BB- long-term corporate credit rating on Domtar Corp. following the company's offer for a bond exchange affecting all of the rated unsecured debt issued by its subsidiary, Domtar Inc. (BB-/stable).

S&P assigned a B+ rating to proposed issues of $1.475 billion and C$157 million, consisting of a $600 million 7 7/8% notes due Oct. 15, 2011, $350 million 5 3/8% notes due Dec. 1, 2013, $400 million 7 1/8% notes due Aug. 15, 2015, $125 million 9½% debentures due Aug. 1, 2016, C$82 million 10% debentures due April 15, 2011 and C$75 million 10.85% debentures due Aug. 5, 2017.

The agency affirmed the $800 million term loan B and $750 million revolving credit facility at BB+.

The outlook is stable.

According to S&P, the ratings reflect the company's aggressive financial risk profile and its unstable profitability and cash flow caused by volatile prices for its commodity paper, pulp and lumber products.

These weaknesses are offset by the company's strong position in the concentrated uncoated freesheet market and its good cost profile, S&P said.

The successive Norampac and Weyerhaeuser transactions lowered the company's fully adjusted debt-to-EBITDA ratio to 3.7 times from 6.2 times, according to the agency.

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