Moody's rates Lecta notes Ba3, B1

Moody's Investors Service said it assigned a Ba3 corporate family rating to Lecta SA, a provisional Ba3 rating to its proposed €473 million senior secured floating-rate notes due 2014 and a provisional B1 to its proposed €175 million senior unsecured floating-rate notes due 2014.

The outlook is stable.

Proceeds from the bonds will be used to partially repay €748.5 million of existing credit facilities, and the company will simultaneously enter into an agreement for a €100 million bridge facility for a securitization program.

The agency said the Ba3 corporate family rating reflects Lecta's leading market positions in its core South European markets of coated wood-free paper, well-managed asset base, favorable product mix and the expectation of an industry-wide price recovery in the latter half of 2007, which should help to bolster the company's financial profile going forward.

However, the rating remains constrained by the low degree of pulp integration, thereby exposing the company to periods of high pulp prices, and Moody's uncertainty as to what extent Lecta's private equity shareholder, which over the last 10 years has been very supportive to Lecta's financial profile, would show similar restraint in the face of strengthened cash flows.

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