Moody's downgrades Lecta

Moody's Investors Service said it downgraded Lecta SA's corporate family and probability-of-default ratings to B2 from B1, €598 million senior secured floating-rate notes due 2014 to B2 (LGD 3, 47%) from B1 (LGD 3, 46%) and €150 million senior unsecured floating-rate notes due 2014 to Caa1(LGD5, 82%) from B3 (LGD5, 80%).

The outlook remains negative.

"The downgrade of Lecta's CFR to B2 was prompted by an unprecedented contraction in coated fine paper deliveries in the company's core markets since December 2008," Christian Hendker, a Moody's assistant vice president, said in a statement.

"Combined with Moody's expectation that the contraction could be sustained over the coming quarters, this increases the likelihood that Lecta will not improve its operating performance and leverage in 2009 as previously expected."

Lecta's rating is constrained by the company's small absolute scale, its product concentration on coated fine paper and its limited geographic diversification, the agency said.

The rating is supported by the company's solid liquidity cushion with on-balance cash of around €140 million as of September 2008, headroom under a revolving credit facility and an extended debt maturity profile, its proactive approach in terms of restructuring and efficiency improvement measures, Moody's noted.

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