Moody’s cuts Millar Western, notes

Moody's Investors Service said it downgraded Millar Western Forest Products Ltd.'s corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD and senior unsecured notes to Caa1 from B3.

The speculative grade liquidity rating was lowered to SGL-4 from SGL-3 and the outlook is negative.

Moody’s said the B3 corporate family rating reflects the company's weak liquidity, high leverage (14 times LTM September 2015), small revenue base and significant exposure to the volatile lumber and market pulp industry. With just one pulp mill and two operating sawmills, all located in Alberta, the company's ratings are constrained by its lack of operating diversity.

Despite low-cost mills with good backward integration into the key inputs of fiber and electricity, operating margins are volatile given the fragmentation of both the lumber and pulp sector which often leads to an over-supplied market, the agency said.

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