Research Update: Domtar Corp. Downgraded To ?BB-? From ?BB? On Higher Leverage; Outlook Stable

We expect Canada-based paper and pulp producer Domtar Corp.'s (Domtar) leverage will remain above 4x over the next couple of years based on a higher debt burden following the acquisition of Resolute Forest Products, as well as earnings pressure from lower commodity prices. As a result, S&P Global Ratings lowered its issuer credit rating on the company to 'BB-' from 'BB'. We also lowered our issue-level rating on the senior secured term loans and notes to 'BB-' (the same as ICR) from 'BB'; the '3' recovery rating on the debt (50%-70%; rounded estimate: 65%) is unchanged. In addition, we lowered our rating on the senior unsecured notes to 'BB-' (the same as ICR) from 'BB', the '4' recovery rating on

...- We expect Canada-based paper and pulp producer Domtar Corp.'s (Domtar) leverage will remain above 4x over the next couple of years based on a higher debt burden following the acquisition of Resolute Forest Products, as well as earnings pressure from lower commodity prices. - As a result, S&P Global Ratings lowered its issuer credit rating on the company to '##-' from '##'. - We also lowered our issue-level rating on the senior secured term loans and notes to '##-' (the same as ICR) from '##'; the '3' recovery rating on the debt (50%-70%; rounded estimate: 65%) is unchanged. In addition, we lowered our rating on the senior unsecured notes to '##-' (the same as ICR) from '##', the '4' recovery rating on the debt (30%-50%; rounded estimate: 30%) is unchanged. - The stable outlook reflects our expectation that leverage could improve to the low-4x area based on our assumptions that commodity prices could be approaching the bottom of the cycle prices....

Research Update