Research Update: Domtar Corp. Downgraded To 'BB' From 'BBB-' On Acquisition By KH; Secured Debt Rated 'BB+' (Recovery Rating: '2')

The acquisition of Domtar Corp. by Karta Halten (KH), a wholly owned subsidiary of the Paper Excellence Group (not rated) has closed, and the recapitalization of the company is almost complete. Domtar's debt levels will materially increase and include new secured notes and term loans that helped fund its acquisition, and the company plans to redeem its outstanding unsecured notes with a portion of the proceeds. As a result, on Dec. 3, 2021, S&P Global Ratings lowered its issuer credit and senior unsecured debt ratings on Domtar to 'BB' from 'BBB-' and removed the ratings from CreditWatch with negative implications, where they had been placed May 11, 2021. We assigned our 'BB+' issue-level rating and '2' recovery rating to the

...- The acquisition of Domtar Corp. by Karta Halten (KH), a wholly owned subsidiary of the Paper Excellence Group (not rated) has closed, and the recapitalization of the company is almost complete. - Domtar's debt levels will materially increase and include new secured notes and term loans that helped fund its acquisition, and the company plans to redeem its outstanding unsecured notes with a portion of the proceeds. - As a result, on Dec. 3, 2021, S&P Global Ratings lowered its issuer credit and senior unsecured debt ratings on Domtar to '##' from '###-' and removed the ratings from CreditWatch with negative implications, where they had been placed May 11, 2021. - We assigned our '##+' issue-level rating and '2' recovery rating to the company's secured debt (previously issued by Pearl Merger Sub Inc., a subsidiary of KH, now amalgamated into Domtar). - The stable outlook primarily reflects our expectation that Domtar will gradually deleverage over the next few years, with an adjusted debt-to-EBITDA...

Research Update