Moody's rates Sappi notes Ba2

Moody's Investors Service said it assigned Ba2 (LGD3, 39%) ratings to Sappi Papier Holding GmbH’s proposed issuance of €450 million senior secured notes due 2022 and amended and restated €465 million revolving credit facility due 2020. The issuer is a direct subsidiary of Sappi Ltd. Sappi's Ba3 corporate family rating and Ba3-PD probability of default rating were affirmed, as were Sappi Papier’s Ba2 (LGD3, 39%) senior secured bond rating and B2 (LGD6, 94%) senior unsecured bond rating. The outlook is stable.

Bond proceeds together with drawings under the amended and restated revolver and cash on hand will be used to redeem the outstanding equivalent of the existing €250 million 2018 notes and $300 million 2019 notes.

The agency said Sappi's Ba3 rating reflects operating profitability, which remains under pressure from difficult market conditions; exposure to the highly cyclical paper and forest products industry and the challenges linked to the structural decline in demand that the paper and forest products industry faces.

Moody’s noted, however, Sappi's still fairly balanced business profile and absolute scale, with revenues of $5.9 billion in the last 12 months ended in December, underpinned by leading market positions in the high-quality publication paper market for coated fine paper and solid geographic diversification.

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