S&P rates Sylvamo BB

S&P said it gave Sylvamo Corp. a BB issuer rating and its planned senior secured term loans BB+ issue and 2 recovery ratings.

International Paper plans to spin off Sylvamo in October. Sylvamo will make an about $1.4 billion payment to IP funded in part by a six-year $520 million senior secured term loan and seven-year $500 million senior secured term loan.

“We view Sylvamo's global mill footprint as a strong credit consideration. Sylvamo has strong local market positions, with more than two-thirds of its capacity in the first quartiles of global and regional cost curves. Its global mill footprint also gives Sylvamo access to raw materials at competitive costs, reducing the impact of volatile commodity swings. Like other paper product producers, Sylvamo's operations are capital intensive and require large investments, providing barriers to entry,” the agency said in a press release.

The outlook is stable, mirroring an expectation of S&P-adjusted EBITDA of nearly $550 million in 2021, leading to expected debt-to-EBITDA leverage of 2.5x-3x and funds from operations to debt between 25% and 30%.

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