Moody's lowers WEPA view to negative

Moody's Investors Service said it affirmed the Ba3 corporate family rating and Ba3-PD probability of default rating of WEPA Hygieneprodukte GmbH, as well as the B1 rating (LGD 4) on its senior secured bonds due 2024.

The outlook was changed to negative from stable.

The action reflects the increasing uncertainty about WEPA's ability to sustainably return its EBITDA margin in the low teens in the percentage terms in the next 12 to 18 months in an environment of increasing and persistently high pulp prices, Moody's said.

An improved margin and EBITDA generation is needed for the company to de-leverage toward the levels that are commensurate with a Ba3 rating.

The debt-funded buyout of the remaining stake in WEPA's Northwood joint venture will further increase leverage, even though not materially, Moody's said, and it will weaken WEPA's liquidity profile.

The operational performance of WEPA and other tissue producers in Europe are currently under pressure, the agency added.

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