Moodys.com
Close
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

Terms of One-Time Website Use

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

MOODY'S DOWNGRADES ABITIBI-CONSOLIDATED'S SNR UNSEC'D RATING TO Ba3 and SPEC GRADE LIQUIDITY RATING TO SGL-4; OUTLOOK REMAINS NEGATIVE

19 Oct 2004
MOODY'S DOWNGRADES ABITIBI-CONSOLIDATED'S SNR UNSEC'D RATING TO Ba3 and SPEC GRADE LIQUIDITY RATING TO SGL-4; OUTLOOK REMAINS NEGATIVE

Approximately US$3.3 Billion of Debt Securities Affected

Toronto, October 19, 2004 -- Moody's Investors Service downgraded Abitibi-Consolidated Inc.'s ("Abitibi") senior implied, senior unsecured and issuer ratings to Ba3 from Ba2. Concurrently, the speculative grade liquidity ("SGL") rating was downgraded to SGL-4 which indicates weak liquidity. The outlook remains unchanged and is negative. The rating action reflects systemic newsprint supply and demand issues: i) Evolving advertising patterns cause newsprint demand to be weak. It appears that more aggressive supply management is required before newsprint prices will increase significantly beyond current levels. ii) Moody's expects Abitibi to continue to invest capital to reconfigure its asset portfolio and product offering to address this matter. While the likely amounts are not expected to be particularly large, and the investments are expected to have long term benefits, these divert near term cash flow from debt reduction. iii) Approximately 30% of newsprint supply is fragmented among a number of smaller producers whose behavior has partially frustrated initiatives to drive price increases through the market and may continue to do so. iv) Abitibi has made tangible progress in reducing its cash costs of production. However, with the Canadian dollar continuing to appreciate and with energy, wood and other input costs continuing to increase, profit margins continue to be under pressure. Moody's expects the combination of these factors will cause Abitibi's credit protection metrics to remain relatively weak over the near term, and there is the potential they may not reflect through-the-cycle measures appropriate for the rating unless proactive steps to reduce debt are taken. As a consequence, the rating outlook remains negative. Lastly, Abitibi's SGL rating is adversely impacted by a US$401 million debt maturity in August of 2005. Given expectations of near term cash flow, it is unlikely this debt maturity can be fully repaid, and at least a portion will have to be refinanced. Notwithstanding Abitibi's capital markets' access and refinance ability, Moody's methodology characterizes this circumstance as evidencing weak liquidity.

Ratings downgraded:

Abitibi-Consolidated Inc.

Senior Implied: to Ba3 from Ba2

Issuer: to Ba3 from Ba2

Senior Unsecured: to Ba3 from Ba2

Senior Unsecured Shelf Registration: to (P) Ba3 from (P)Ba2

Speculative Grade Liquidity Rating: to SGL-4 from SGL-3

Abitibi-Consolidated Company of Canada

Bkd Senior Unsecured: to Ba3 from Ba2

Senior Unsecured Shelf Registration: to (P) Ba3 from (P)Ba2

Abitibi-Consolidated Finance L.P.

Bkd Senior Unsecured: to Ba3 from Ba2

Senior Unsecured Shelf Registration: to (P) Ba3 from (P)Ba2

Donohue Forest Products Inc.

Bkd Senior Unsecured: to Ba3 from Ba2

Ratings Affirmed:

Outlook: Negative

The Ba3 ratings reflect Abitibi's position as North America's leading producer of newsprint and uncoated groundwood paper. Within the segment, Abitibi has a relatively low cost position, supported in part by strong backward integration into timberlands and significant energy self-sufficiency. While Abitibi has no plans to divest its large hydro-electric facilities or its PanAsia joint venture interest, it does have the flexibility to do so. It is likely these would have significant sales value that could be used to significantly reduce debt. Abitibi also has a significant and cost-competitive lumber business. With newsprint and groundwood paper prices gradually increasing, 2004 and 2005 should show some sequential improvement in LTM measures.

The factors off-setting these positives begin with a very significant debt burden resulting from a sequence of acquisitions by Abitibi and various predecessor companies that were substantially debt-financed. Moody's estimates Abitibi's annual run-rate for gross sales to be approximately C$5.7 billion (and gradually increasing with each quarter as the sector emerges from a prolonged trough). However, with consolidated debt levels in the mid C$5 billion range (including outstandings under an accounts receivable program), the ratio of debt-to-sales is approximately 1:1. This implies that meaningful debt reduction from internally generated cash flow is likely to occur only over a prolonged period. Aside from relatively depressed newsprint and groundwood paper pricing (the consequence of structural issues itemized in the opening paragraph), Abitibi has had to cope with an appreciation of the Canadian dollar (nearly 25% over the past year-and-a-half), which has adversely affected margins of its Canadian operations, and cash outflows to pay anti-dumping and countervailing duties on softwood lumber exports to the United States. In addition, the company has a significant pension funding deficit that requires cash contributions, and, as noted above, has been investing to reconfigure its asset portfolio and product offering.

Given the combination of its cash flow profile and near term debt maturities, Abitibi has weak liquidity. The company maintains a C$800 million revolver that is largely un-drawn and a US$500 million accounts receivable securitization vehicle that is generally more fully utilized. The bank facility matures in June 2006. Moody's views the revolver as adequate back-up for the approximately C$400-to-C$500 million in outstanding receivables' financing, as well as other likely contingent needs. However, with such a large proportion of the bank facility backing up the receivables facility, Abitibi has little capacity to use the bank facility to assist with repaying long term debt maturities in advance of cash flow from operations being available. With market factors likely to keep cash flow from operations from increasing dramatically from current levels, and with other activities consuming cash (the above-noted strategic capital expenditures as well as pension contributions), it is unlikely that the company's US$401 million August 2005 maturity will be fully repaid and at least a portion of it will be refinanced. Notwithstanding Abitibi's capital markets' access and ability to execute the refinance, this circumstance results in liquidity being characterized as weak.

Abitibi is in compliance with its key financial covenants (Maximum Debt-to-Capitalization (64% actual at June 30, 2004 versus = 70% threshold), and Minimum Interest Coverage (1.53x actual versus 1.00x threshold; threshold increases to 1.25x for the 3rd and 4th quarters, 1.50x for each quarter-end in 2005, and 1.75x thereafter)). Moody's estimates that Abitibi could access the entire unused amount of the credit facility without violating its Debt-to-Capitalization covenant. The cushion relative to this test may not be as great in future quarters. However, so long as Abitibi is not required to make material adjustments to the carrying value of certain assets (idled assets whose carrying value has not been written-off), and so long as additional price increases are realized during the course of the year, Abitibi should be able to manage this figure so that compliance is maintained. With Cash Flow from Operations expected to display sequential improvement over the next several quarters, Moody's also expects the Interest Coverage test cushion to increase through 2005.

The negative outlook is a reflection of Moody's assessment of the newsprint market, and the resulting expectation that Abitibi's operating performance and credit statistics will remain relatively weak in 2004 and 2005. For a Ba3 rating, Moody's expects average through-the-cycle RCF to be in excess of 10%, with the related FCF measure being in excess of 5%. Given the excess capacity in the newsprint and groundwood paper markets, the very weak capacity utilization rates of Abitibi's customer base (the printing and related services sector; low-to-mid 70% range), and increased energy and recycled fiber prices, there is considerable uncertainty as to the magnitude, sustainability, and impact of the commodity price recovery. It appears there is little hope of a demand-driven price recovery. Consequently, it appears that more aggressive supply management is required. While the top five producers make up 70% of the market, with the other 30% being very fragmented, the market leaders have been disproportionately responsible for supply-side initiatives. This fragmentation may also be partially frustrating initiatives to drive price increases through the market, with behavior of the smaller producers undermining the market. Consequently, it appears management's most pragmatic alternative, i.e. continuing to invest to restructure its asset portfolio and product offering, consumes cash flow at a time when its margins (and ability to repay debt) continue to be under pressure. Accordingly, there is a significant probability of the company's performance not meeting the above performance benchmarks.

Either or both of the outlook and ratings could be upgraded if Abitibi takes specific proactive steps to permanently reduce indebtedness or increase profitability so as to ensure the above credit metrics are met or exceeded. Conversely, a downgrade could result if it becomes clear that through-the-cycle performance will not, in Moody's opinion, meet the above benchmarks, if the company pursues material debt-financed acquisitions, or if liquidity arrangements deteriorate significantly.

Abitibi-Consolidated Inc., headquartered in Montreal, Quebec, is North America's leader in newsprint and uncoated groundwood paper and also has a significant lumber business.

Toronto
Bill Wolfe
Vice President - Senior Analyst
Corporate Finance Group
Moody's Canada Inc.
(416) 214-1635

New York
Mark Gray
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR  PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​​​
Moodys.com