Moody's may up Domtar

Moody's Investors Service said it placed under review for upgrade Domtar Corp.'s Ba3 corporate family and probability-of-default ratings, Ba1 (LGD2, 22%) senior secured facility rating and B1 (LGD5, 74%) senior unsecured bond rating.

The action was prompted by Domtar's improved credit protection metrics, the progress made in the integration of Domtar and Weyerhaeuser's fine paper assets, management's commitment to debt reduction and the expectation of continued strong financial performance, Moody's said.

Domtar's strengths include the company's significant position as the largest fine paper producer in North America, its favorable cost position and the improved size and operating diversity that resulted from its merger with Weyerhaeuser's fine paper business, the agency said.

Offsetting these strengths are declining demand for fine paper and rising input costs that may constrain projected margin expansion and free cash flow generation, Moody's said.

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