Moody's rates Ainsworth notes B1

Moody's Investors Service said it rated Ainsworth Lumber Co. Ltd.'s pending US$100 million senior unsecured debt issues B1.

At the same time, Moody's affirmed the company's B1 senior implied rating, the B1 ratings on the company's existing senior unsecured notes and the stable outlook.

Ainsworth will use the proceeds of the new note issues together with cash resources to purchase Voyageur Panel Ltd., a business operating single OSB mill jointly owned by Boise Cascade Corp., Abitibi-Consolidated Inc., Northwestern Mutual, and Allstate Insurance Co. The purchase price is approximately US$193 million plus fees and expenses.

Moody's said the cash component of the purchase price results in prevailing and expected credit protection measures that are substantially unchanged from those existing prior to the transaction. Ainsworth is adding a good quality asset to its existing small portfolio of relatively low cost OSB mills at a point in time when OSB pricing is at unprecedented levels that are substantially above historic observations, facilitating the rapid accumulation of cash flow.

The ratings continue to be constrained, the agency said, by Ainsworth's highly leveraged capital structure, the company's relative lack of product and geographic diversity and lack of size in comparison to key competitors in the oriented strandboard market. In addition, pricing for OSB is extremely volatile, and so too is the company's cash flow.

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