Moody's cuts Domtar to junk

Moody's Investors Service said it downgraded Domtar Inc.'s senior unsecured debt rating to Ba2 from Baa3 and assigned a Ba2 Corporate Family Rating (formerly known as the senior implied rating).

The outlook is stable.

The ratings downgrade was based on the company's ongoing depressed cash flow in relation to a relatively high level of debt; margin pressure from higher fiber, energy, and chemicals costs; the negative impact of the strong Canadian dollar; and Moody's expectation that there will be a persistent supply/demand imbalance in the company's key North American uncoated woodfree paper market that will likely inhibit a restoration of cash flow and credit metrics to levels that can support a Baa3 rating over the near to intermediate term, the agency said.

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