Moody's cuts Abitibi-Consolidated

Moody's Investors Service said it downgraded Abitibi-Consolidated Inc.'s senior implied, senior unsecured and issuer ratings to Ba3 from Ba2. Concurrently, the speculative grade liquidity rating was downgraded to SGL-4.

The outlook is negative.

Moody's said the rating action reflects systemic newsprint supply and demand issues, including evolving advertising patterns causing newsprint demand to be weak, Moody's expectation for Abitibi to continue to invest capital to reconfigure its asset portfolio and product offering to address this matter, about 30% of newsprint supply is fragmented among a number of smaller producers whose behavior has partially frustrated initiatives to drive price increases through the market and may continue to do so and the fact that Abitibi has made tangible progress in reducing its cash costs of production.

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