Moody's cuts Appvion to SGL-3

Moody's Investors Service said it lowered Appvion Inc.'s speculative-grade liquidity rating to SGL-3 from SGL-2 following the company's revised refinancing plans and affirmed its corporate family rating at B2, probability of default rating at B2-PD, proposed $335 million first-lien term loan due 2019 at Ba3 (LGD2, 27%, changed from 28%), $162 million of 11¼% second-lien senior secured notes due 2015 at B3 (LGD4, 69%), $32 million of 9¾% senior subordinated notes due 2014 at Caa1 (LGD6, 96%, changed from 93%) and probability of default rating at B2-PD. The outlook remains positive.

The company lowered the size of the term loan from $375 million, shelved its $200 million second-lien term loan and terminated its tender offer to purchase the 9¾% subordinated notes due 2014 and 11¼% second-lien notes due 2015. Appvion is proceeding with the tender offer for its first-lien notes.

The agency said the SGL-3 speculative grade liquidity rating reflects the company's adequate liquidity position.

Appvion's B2 corporate family rating reflects the company's leading global market position in several specialty paper niches, its improving product diversity and the company's strong and stable margins, Moody's said.

The rating is tempered by the secular contraction in the demand for the company's carbonless paper business, the company's limited financial flexibility due to its employee stock ownership plan and the company's exposure to potential contingencies associated with environmental issues, the agency said.

The positive outlook reflects Moody's expectations of improved financial performance, supported by higher earnings due to implementation of the company's new paper supply contract, lower interest costs and growth from the company's thermal paper and encapsys business.

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