S&P ups SP Newsprint outlook to positive

Standard & Poor's said it affirmed SP Newsprint Co.'s B+ corporate credit rating and assigned a recovery rating of 2 to the company's $257 million bank credit facilities, which are rated B+.

S&P said the outlook was revised to positive from stable, reflecting meaningful debt reduction and improved credit measures since ratings were assigned about two years ago and expected further debt reduction in 2006, given favorable industry conditions.

The ratings reflect the company's limited product diversity in the highly cyclical commodity newsprint market, its moderate scope of operations and aggressive debt levels, partially offset by the company's low-cost mills and support from equity owners, the agency said.

Although improving, the company's leverage remains aggressive, with debt to 12-month EBITDA and debt to capital of 3.5x and 48%, respectively, at Dec. 25. Debt totaled $226 million, including capitalized operating leases of $24 million, and funds from operations to debt was 23%, the agency said.

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