S&P rates Domtar debt BB-

Standard & Poor's said it assigned a BB- rating to Domtar Corp.'s (BB/negative) $400 million senior unsecured notes due June 2017 with a 5 recovery rating.

Proceeds from these notes will be used to replace part of Domtar's 7 7/8% unsecured notes outstanding due 2011 and for general corporate purposes.

"The BB corporate credit rating and negative outlook on Domtar reflect our view of the company's leading market position in the North American uncoated free sheet market and good cost profile," S&P analyst Jatinder Mall said in a statement.

"The ratings are constrained, however, by what we see as a steady decline in demand for uncoated free sheet market; volatile prices for commodity paper, pulp, and lumber products; and a weak lumber business," Mall added.

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