S&P rates Domtar notes BBB-

Standard & Poor's said it assigned a BBB- rating to Domtar Corp.'s proposed $250 million senior unsecured notes.

The notes rank equally with all of the company's existing unsecured obligations.

The proceeds will be used to partially fund Domtar's recently announced acquisition of Laboratorios Indas.

Domtar's debt-to-EBITDA ratio is expected to increase to 2.5x pro forma for the acquisition from 2.2x as of Sept. 30, S&P said.

The ratings reflect a view that the company will be able to de-leverage following the partially debt-financed Indas acquisition such that leverage falls below 2x and funds from operations-to-debt exceeds 40% by year-end 2014, the agency said.

Acquisition-driven earnings growth from Domtar's personal care segment is expected to offset earnings lost from diminishing uncoated free sheet consumption due to electronic substitution, S&P said.

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