Moody's confirms Recycled Paper

Moody's Investors Service said it confirmed Recycled Paper Greetings, Inc.'s corporate family and probability-of-default ratings at Caa1, its $20 million first-lien senior secured revolving credit facility due 2010 and $109.25 million first-lien senior secured term loan due 2011 at B2 (LGD2, 29%) and its $79.55 million second-lien senior secured term loan due 2012 at Caa3 (LGD5, 84%).

This completes the review begun on April 11, and the outlook is negative.

The agency said the confirmation reflects the company's improved liquidity following its recent completion of an amendment that restored access to the revolving credit facility and revised financial covenants. As part of the amendment, Monitor Clipper and its affiliates also made an equity contribution of $15 million, of which $10 million was applied to the first-lien term loan and the remainder will increase cash.

Notwithstanding these benefits, the ratings continue to reflect Moody's concern over the company's recent unexpected decline in operating performance for the January 2007 quarter and its plans to implement scan-based trading in the near term, particularly given its modest scale and limited financial flexibility.

The negative outlook reflects Recycled Paper's limited financial flexibility, concerns over its ability to absorb another unforeseen decline in operating performance and uncertainty over its ability renew contracts with key customers on terms that are similar to its current contracts, the agency said.

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