S&P rates Mercer notes B

Standard & Poor's said it affirmed the B long-term corporate credit rating on Mercer International Inc., and assigned a B rating and 4 recovery rating to the company's proposed $300 million of new senior unsecured notes. The 4 indicates an expectation for 30% to 50% recovery in a default.

The outlook is stable.

The proceeds will be used to retire the existing $310 million senior unsecured notes due February 2013, S&P said.

The ratings reflect the company's limited product diversity, significant earnings volatility for its single product and its vulnerability to changes in foreign-exchange rates, S&P said.

These weaknesses are mitigated by the company's low cost position, good market position in the northern bleached softwood kraft pulp industry and additional electricity revenues at Celgar, putting the company in a better position to absorb lower pulp prices, the agency said.

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