MOODY'S CONFIRMS A3 SENIOR UNSECURED DEBT RATINGS OF INTERNATIONAL PAPER
New York, 06-18-98 -- Moody's Investors Service confirmed the A3 senior unsecured debt ratings of International Paper Company and the Baa1 senior unsecured debt ratings of subsidiary Federal Paper Board Company, Inc. The confirmation follows the announcement by IP of its agreement to acquire the Zellerbach distribution business of Mead Corp. in a debt financed transaction totally approximately $263 million. Ratings confirmed are:
International Paper Company:
Senior unsecured noted, debentures, industrial revenue bonds, and medium term notes; A3
Shelf registration; A3
Commercial paper; Prime-2
International Paper Capital Trust:
Preferred stock at "baa1"
Federal Paper Board Company, Inc.:
Senior unsecured debentures and industrial revenue bonds; Baa1.
In announcing the confirmation, Moody's noted the modest size of the acquisition and corresponding increase in debt in relation to the size of the company. Moody's also mentioned that anticipated cost savings from the combination of Zellerbach with IP's existing distribution business, xpedx, was a factor in the rating decision. The two business have significant overlapping operations, which, when restructured, should substantially increase operating margins, mitigating some of the detrimental effects of increase leverage on the company's existing debt protection measurements.
However, the rating agency believes that the company has little room for further debt financed acquisitions and increased spending within its existing rating category. With earnings at current levels, additional acquisitions and spending will have to be partially equity financed if ratings are to be maintained.
International Paper company, headquartered in Purchase, New York, is a worldwide producer of printing papers, packaging and forest products.
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