S&P rates Sappi bonds, upsized revolver BB

Standard & Poor’s said it affirmed the BB- long-term and B short-term corporate credit ratings on Sappi Ltd.

The agency also said it assigned a recovery rating of 2 and an issue rating of BB to the proposed €450 million senior secured bonds due 2022 and the upsized €465 million revolving credit facility.

Both are in line with the affirmed recovery and issue ratings on the existing senior secured bonds, including its $400 million notes due 2017 and $350 million notes due 2021 affirmed.

The ratings reflect the company’s limited amount of prior-ranking liabilities and the relatively comprehensive security package, S&P said.

The proceeds of the proposed bond issuance are expected to repay the €250 million 6 5/8% senior secured notes due 2018 and $300 million 8 3/8% senior secured notes due 2019.

S&P also said it affirmed the B rating on Sappi Papier Holding GmbH’s $250 million senior unsecured notes. The recovery rating on the senior unsecured debt is unchanged at 6, indicating 0 to 10% expected default recovery.

Despite difficult trading conditions in some of its markets, the agency said it expects that Sappi will be able to maintain its margins in the financial year ending Sept. 30, 2015 and slightly improve its credit metrics by gradually reducing its debt, the agency said.

Now that Sappi has completed its dissolving wood pulp mill conversion program, S&P said it expects the company’s capital expenditure to return to historical levels and for the group’s credit metrics to turn positive again.

© 2015 Prospect News.
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