Moody's: SFK Pulp view negative

Moody's Investors Service said it revised SFK Pulp Fund's outlook to negative from stable and affirmed its B1 corporate family rating, Ba3 senior secured bank credit facility (LGD3, 37% from 41%) and SGL-2 speculative grade liquidity rating.

The negative outlook reflects expectations that SFK's margins will be pressured from rapidly declining global pulp prices and relatively high virgin fiber costs, according to the agency.

Moody's said it anticipates falling pulp prices, high virgin fiber costs and declining demand from paper producers will put pressure on margins despite the anticipated benefits from declining recycled fiber and energy costs, and the weakened Canadian dollar.

SFK's B1 corporate family rating reflects its relatively low cost asset base with good backward integration in energy and fiber supply, its modest profit margins and its good liquidity profile, the agency said.

Offsetting these strengths is SFK's small scale, single product focus, geographic concentration and volatile product profile, the agency noted.

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