S&P cuts Domtar to junk

Standard & Poor's said it lowered its long-term corporate credit and senior unsecured debt ratings on Domtar Inc. to BB+ from BBB-.

S&P also cut Domtar's global scale preferred stock rating to B+ from BB and Canadian national scale preferred stock to P-4 from P-3.

At the same time, S&P revised its outlook on Domtar to stable.

S&P said the ratings on Domtar reflect the company's exposure to cyclical paper prices, aggressive debt leverage and a declining cost position due to a stronger Canadian dollar.

Leverage and interest coverage metrics have marginally improved in recent quarters, although S&P said it does not believe they will improve sufficiently to maintain investment-grade status.

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