Moody's: Domtar outlook developing

Moody's Investors Service said Domtar Inc.'s outlook remains developing following the company's announcement that it reached an agreement in principle to sell its 50% joint venture interest in Norampac Inc. to its joint venture partner Cascades Inc. for cash proceeds of C$560 million, which will be mainly be used to reduce financing requirements for the formation of Domtar Corp. from the combination of Domtar Inc. with Weyerhaeuser Co.'s fine paper business and related assets, which contemplates a $1.35 billion cash payment being made to Weyerhaeuser.

The agency's preliminary estimates indicate that Domtar Corp. will be slightly less leveraged than existing Domtar Inc. and, on this basis, it appears that the transaction is a positive development for bondholders. However, significant regulatory hurdles, lack of disclosure concerning the historical performance of the combined assets and risks related to the achievement of potential synergies limit Moody's ability to assess the impact of the potential transaction. Therefore, the agency said it is not yet possible to determine whether or not the positive developments are sufficient to result in a ratings upgrade or are merely sufficient to allow the outlook to be revised to stable from negative.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.