S&P: Nine Dragons on watch

Standard & Poor's said it placed its BBB- long-term corporate credit rating on Nine Dragons Paper (Holdings) Ltd. and its BBB- issue rating on the company's $300 million senior unsecured notes on Creditwatch with negative implications.

The Creditwatch placements follow a significantly larger-than-expected increase in Nine Dragons' outstanding debt for the fiscal year ended June 30, the agency said.

The steep rise in debt was driven by higher-than-expected capital expenditure and a slippage in profitability due to adverse market conditions, S&P noted, adding that Nine Dragons' credit protection measures materially deteriorated in fiscal 2008, with EBITDA interest coverage declining to 4.4x from 9.0x in fiscal 2007, funds from operations to total debt weakening to 15% from 36%, and debt to EBITDA increasing to 5.5x from 2.4x.

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