S&P: SFK Pulp unaffected

Standard & Poor's said its ratings and outlook on SFK Pulp Fund (B+/stable) are unaffected by SFK's announcement of a C$75 million issuance of new fund units to reduce its C$200 million term facility, which contributed to higher leverage in the wake of the acquisition of two recycled bleach kraft mills in October.

Although this lowers the fund's debt leverage, the improvement in its financial risk profile is limited by the fact that interest savings will be almost totally offset by higher cash distributions on the new trust units, the agency said. Notwithstanding improving profitability from better pulp fundamentals, S&P said SFK's financial policy remains fairly aggressive because of high cash payouts on its trust units and the ratings remain constrained by the fund's limited revenue diversity and its exposure to volatile pulp prices and exchange rates.

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