S&P ups U.S. Timberlands Klamath ratings

Standard & Poor's said it raised its corporate credit and senior unsecured debt ratings on U.S. Timberlands Klamath Falls LLC to CCC from CC.

The outlook is negative.

"The upgrade was prompted by the company's payment on Dec. 15 of interest on its $225 million 9.625% senior unsecured notes due 2007, within the 30-day grace period allowed under the bond's indenture," said S&P credit analyst Dominick D'Ascoli.

S&P said the ratings reflect the significant deterioration in the volume of merchantable timber on U.S. Timberlands Klamath Falls LLC's properties during the past few years. This has occurred as a result of aggressive harvest levels and transfers of property and cutting rights to an affiliate, U.S. Timberlands Yakima LLC.

The company's principal operations consist of growing and harvesting timber and selling logs and standing timber to third-party wood processors. Log prices have fallen sharply during the past few years despite a high level of housing construction and remodeling. Price weakness can be traced to customer consolidation, technological improvements in sawmilling resulting in higher log yields, and an increase in low-cost imported logs and wood products.

Consequently, to generate cash flow to meet the interest expense on its heavy debt load, the company has needed to harvest at levels well above the timber growth rate and its original harvest plans, the agency said.

© 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.