Moody's rates Wellman facility

Moody's Investors Service said it downgraded Wellman Inc.'s senior implied rating to B2 from Ba2 and assigned a B1 rating to its proposed $175 million first priority senior secured revolver and $125 million first priority senior secured term loan, both due 2009. Moody's also assigned a B2 rating to the company's proposed $300 million second priority senior secured term loan due 2010.

Moody's said the ratings downgrades were prompted by weaker-than-expected operating performance, a significant deterioration in 2003 operating results, and Moody's expectation that business conditions within the company's packaging products group and fibers and recycled products group will remain challenging for the medium term.

Moody's noted that completion of the proposed financing is important because the company needs to address an $87 million raw material purchase obligation, an $80 million receivable securitization facility due March 2004 ($28 million was drawn at Dec. 31), a $150 million synthetic lease obligation due July 2004, and $35 million unsecured notes due November 2004.

Additionally, the company was not in compliance with the financial covenants under its credit facility as of Dec. 31, and it has obtained a waiver that extends through mid-February.

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