S&P moves Domtar view to negative

S&P said it changed the outlook for Domtar Corp. to negative from stable but affirmed all its ratings on the company, including the BB senior unsecured rating.

The Paper Excellence Group, Domtar’s parent, agreed to buy Resolute Forest Products Inc., through Domtar for an enterprise value of about $2.7 billion. The deal is expected to close in the first half of 2023.

“Details regarding the financing of the transaction are unknown. However, we believe Domtar's pro forma capital structure is likely to include incremental debt used to fund the acquisition in addition to debt assumed from Resolute. Our assumption is based mainly on the use of debt funding by Paper Excellence to acquire Domtar in late 2021,” S&P said in a press release.

The possibly higher debt level could lead to a downgrade, the agency noted.

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