Moody's rates IP notes Baa3

Moody's Investors Service said it assigned a Baa3 rating to International Paper Co.'s $750 million senior notes offering due 2039.

The outlook is negative.

Proceeds are expected to be used to refinance existing debt.

IP's Baa3 rating reflects the company's significant scale and leading supplier positions with growing geographic diversification, stable profit margins, vertically integrated relatively low cost asset base and good liquidity profile deriving from substantial free cash flow and committed liquidity facilities, the agency said.

Ratings also reflect the company's substantial pension funding deficit, cash contributions for which may reduce cash flow that otherwise could be applied toward debt reduction, the agency noted.

The declining demand arising from weak economic conditions as well as the industry trend toward reducing packaging materials and the increasing use of electronic communication are constraining factors, Moody's said.

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