S&P Affirms Repap New Brunswick's Ratings, Off Watch
TORONTO--(BUSINESS WIRE)--June 11, 1999--Standard & Poor's today affirmed its ratings on Repap New Brunswick Inc. (see list below). The ratings were removed from CreditWatch, where they were placed on June 7, 1999. The outlook is stable.
The rating action follows the settlement of a short strike with the signing of a new agreement between the company and its union. While this recent work stoppage will have a small one-time adverse impact on second-quarter cash flow and profitability, the company has sufficient liquidity to offset this near-term decline.
The ratings on Repap New Brunswick reflect very high debt levels; a business mix narrowly focused on cyclical coated paper products; and cost-efficient, vertically integrated operations. Repap operates one large pulp and coated paper mill that benefits from modern equipment and substantial economies of scale. However, a lack of diversity exposes the company to the significant fluctuations of coated paper prices. For instance, prices exceeded US$950 per ton during the first half of 1998 before declining to about US$760 per ton currently.
The very aggressive growth strategy of Repap's previous management left the company with very high debt levels and little financial flexibility. With the recently completed US$100 million debt issue, total debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) is a weak 6.8 times.
OUTLOOK: STABLE
Repap New Brunswick's EBITDA should cover both interest and limited capital spending requirements near term. Improved liquidity is expected to provide some flexibility if weak market conditions persist, Standard & Poor's said.---CreditWire
RATINGS AFFIRMED AND REMOVED FROM CREDITWATCH
Rating Repap New Brunswick Inc.
Corporate credit rating B-Senior secured notes B-First priority mortgage notes B-First priority senior secured notes B-Second priority senior secured fixed notes CCC+
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Contact:
Blaise Ganguin, Toronto (1) 416-202-6007 |
