S&P cuts Abitibi-Consolidated

Standard & Poor's said it lowered its long-term corporate credit rating on newsprint producer Abitibi-Consolidated Inc. to BB from BB+ and lowered all ratings outstanding, including those on subsidiary Abitibi-Consolidated Co. of Canada, to BB from BB+.

The outlook is negative.

S&P said the downgrade stems from the significant deterioration in profitability and cash flow protection, due to a strong Canadian dollar and protracted weakness in North American newsprint demand, and the increased likelihood that the company will not be able to achieve financial performance through the cycle that is commensurate with the former ratings.

"The ratings action also reflects concern that U.S. newsprint demand recovery from current levels might be limited, due to greater-than-expected effects of waning newspaper readership and lower commercial printing volumes," said S&P credit analyst Clement Ma. Because industry capacity closures may be insufficient to compensate for this structural decline and it could be difficult for North American newsprint producers to earn a reasonable return, S&P said it believes this industry might no longer be investment grade.

The ratings on Montreal, Que.-based Abitibi reflect its high debt levels, heavy exposure to cyclical commodity-oriented groundwood papers, and weak financial performance in the wake of highly unfavorable industry conditions. These risks are partially offset by the company's market position in newsprint and groundwood papers, and its competitive cost position in North America.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.