MOODY'S LOWERS LONG TERM SECURITIES RATINGS OF INTERNATIONAL PAPER (SR. DEBT TO Baa1); SHORT-TERM P-2 RATING PLACED UNDER REVIEW FOR POSSIBLE DOWNGRADE, ALL LONG-TERM RATINGS REMAIN UNDER REVIEW FOR POSSIBLE DOWNGRADE. CHAMPION INTERNATIONAL DEBT RATINGS
Moody's Investors Service lowered the long-term debt ratings of International Paper as well as all of the industrial revenue and pollution control supported bonds to Baa1 from A3; all long term ratings remain on review for possible downgrade, continuing the review begun February 17, 2000. At the same time Moody's placed International Paper's Prime-2 commercial paper rating under review for possible downgrade. Moody's also placed all long and short-term debt ratings of Champion International Corporation under review for possible downgrade. These rating actions are prompted by International Paper's announcement that it had made an offer to acquire Champion International for approximately $8.4 billion in cash and stock, including the assumption of approximately $2.3 billion of Champion debt, and following several years of pricing constrained operating earnings that already has left debt protection measurements weakened.
Ratings lowered:
International Paper Company and/or International Paper Capital Trusts - senior notes, debentures, Eurobonds, medium term notes, and industrial revenue and pollution control
bonds - to Baa1 from A3
shelf registration - to (P)Baa1 from (P)A3
junior subordinated deferred interest debentures - to Baa3 from Baa2
preferred stock - to "baa2" from "baa1"
Union Camp Corporation - notes, debentures, and medium term note program - to Baa1 from A3
Federal Paper Board Inc - notes - to Baa1 from A3
Ratings on review for possible downgrade:
International Paper Company and/or International Paper Capital Trusts - senior notes, debentures, Eurobonds, medium term notes, and industrial revenue and pollution control
bonds -currently Baa1
Commercial Paper - currently Prime-2
shelf registration - currently (P)Baa1
junior subordinated deferred interest debentures - currently Baa3
preferred stock - currently "baa2"
Union Camp Corporation - notes, debentures, and medium term note program - currently Baa1
Federal Paper Board Inc - notes - currently Baa1, shelf registration - currently (P)Baa1
Champion International Corporation - senior notes, bonds, debentures, and industrial revenue and pollution control bonds - currently Baa1
Commercial Paper - currently Prime-2
Moody's notes that International Paper's long-term ratings had been placed under review on February 17, 2000 following the announcement that International Paper had made an all cash tender offer for Shorewood Packaging Corp. Our A3 ratings on IP securities previously had incorporated our expectation that International Paper would continue in its debt reduction program, and refrain from making debt-financed acquisitions until debt protection measurements had demonstrated sustained improvement We believe that International Paper may have altered its strategy towards balance sheet management, with the acquisition of Shorewood and the potential purchase of Champion demonstrating International Paper's willingness to participate in debt-financed transactions in the rapidly consolidating paper and forest products industry. As a result, Moody's believes that, going forward, International Paper's debt protection measurements throughout the paper industry cycle will be more reflective of a Baa credit.
Moody's notes that International Paper has been able to extract significant synergies from its recent acquisitions, including those of Federal Paper Board and Union Camp. We consider it likely that International Paper will be able to build on its past experience to integrate and build on the strengths that both Shorewood, and possibly Champion can bring to its core printing paper, packaging, and wood/timber businesses. Never the less, the build up in debt from these two transactions approaches $5 billion, and even assuming the realization of synergies, the success of both IP's and of Champion's EBIT improvement programs, and a strong cyclical upturn, we believe that it will be difficult to rapidly repay this acquisition debt with cash from operations, leaving debt protection measurements inadequate to support the A3 rating.
International Paper has indicated that it will proceed with more than $3 billion in asset sales, which it expects to compete by the end of 2001, using the proceeds to reduce what will be close to $16 billion in debt or debt-like securities. Moody's review will focus on the timing of the sales and the magnitude of the proceeds. At this point, even should sales be delayed, however, it is our expectation that International Paper senior unsecured debt will continue to be rated investment grade.
Moody's review of the ratings of International Paper will also focus on this possible acquisition of Champion, as well as earlier acquisitions and their broad ramifications for operations and financial strategy for International Paper. Our review will assess the extent to which the company's synergies, recent and on-going cost and productivity improvement programs, can enhance base line cash flow, and coming on top of improving industry pricing, can improve debt protection measurements in the near-term. The ratings of Champion International have been placed under review for possible downgrade in recognition of the acquisition effort, and the potential that it may negatively impact the credit quality of Champion.
International Paper Company, headquartered in Purchase, New York, is a worldwide producer of printing papers, packaging, and forest products. Champion International, headquartered in Stamford, Connecticut, is a diversified paper and forest products company.
© 2023 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 CREDIT RATINGS AFFILIATES ARE THEIR 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 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 APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S 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 credit 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 $5,000,000. 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, Inc. 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 — Charter Documents - 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 JPY100,000 to approximately JPY550,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.
