Moody's may cut Ainsworth

Moody's Investors Service said it placed the B1 ratings of Ainsworth Lumber Co. Ltd. on review for possible downgrade on news of the company's agreement to purchase Potlatch Corp.'s oriented strandboard assets for $459.5 million in cash.

Moody's anticipates that Ainsworth will use the proceeds of new debt plus some amount of cash on hand to fund the acquisition. Pending satisfaction of closing conditions, the transaction is expected to close in September.

Ratings on review include the company's B1 senior implied and issuer ratings and B1 rating on the company's $320 million 6.75% senior unsecured notes due March 15, 2014.

Ainsworth's existing B1 ratings reflect the company's relatively small size, limited product and geographic diversity, high level of debt, and the extremely volatile pricing of its core OSB product line. Moody's ratings also reflected the sound quality of the company's modern OSB mills (three of which are wholly owned with a third being a 50% joint venture) together with solid fiber supply and liquidity arrangements.

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