S&P downgrades Klabin

S&P said it lowered the global scale corporate credit rating on Klabin SA to BB+ from BBB- and national scale corporate credit rating to brAA from brAA.

The agency also said it lowered the rating on the financing vehicle Klabin Finance SA's $500 million senior unsecured notes, which Klabin guarantees, to BB+ from BBB-.

The outlook is stable.

S&P also said it also assigned a 3 recovery rating on Klabin Finance's notes, indicating 50% to 70% expected default recovery.

The downgrade reflects a view that Klabin's debt reduction will be slower amid softer-than-expected operating results, the agency said.

Even though Klabin implemented its R$8.5 billion investment on time and on budget, the softer pulp prices and the recently appreciated Brazilian real raised the company's adjusted debt-to-EBITDA to the 4.5x to 5x range in 2016, in comparison with a previous forecast of 3.5x to 4.0x, S&P explained.

But the agency said it expects the company’s leverage profile to improve by 2017 once the new plant becomes fully operational and investment needs decrease.

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