Moody's cuts Appleton

Moody's Investors Service said it downgraded Appleton Papers Inc.'s corporate family rating to B2 from B1 and its speculative-grade liquidity rating to SGL-4 from SGL-3 while the company's other existing debt ratings were also downgraded.

All long-term ratings were placed on review for possible further downgrade, the agency said, adding that the downgrade was prompted by Moody's expectation of weak operating performance due to difficult market conditions, lower volumes and prices, and margin erosion, all potentially leading to modest cash flow and heightened leverage.

According to Moody's, the review is focused on Appleton's liquidity as 1) revolving credit facility availability is limited and may diminish and 2) credit facility financial covenants may be pressured. In 2008, the company increased revolver outstandings to cover higher capital expenditures, environmental payments, pension contributions, and employee stock ownership requirements.

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