Moody’s gives Lecta Caa1, notes Caa2

Moody’s Investors Service said it assigned a first-time Caa1 corporate family rating and a Caa1-PD probability of default rating to Lecta Ltd.

Concurrently, Moody’s assigned B2 ratings to the €115 million guaranteed super senior bank credit facilities due in 2022 and Caa2 ratings to the €256 million guaranteed senior secured notes issued by Paper Industries Intermediate Financing Sarl, a fully owned subsidiary of Lecta Ltd. The outlook is negative.

“The Caa1 CFR recognizes the challenges for Lecta in recovering from the current difficult trading conditions as a result of the coronavirus pandemic and the significant decline in demand for CWF (coated woodfree) paper as well as some execution risk related to the company’s strategic repositioning with a stronger focus on specialty papers. Moody’s expects Lecta’s leverage, measured as Moody’ s-adjusted Debt/EBITDA, to gradually improve towards 9x next year and with further gradual improvements thereafter,” the agency said in a press release.

The Caa2 rating assigned to the notes reflects the priority ranking of the B2 rated super senior credit facilities, which have a sizeable amount that leads to a one-notch difference between the Caa2 senior secured notes and the CFR, Moody’s said.

The outlook reflects the uncertainty of the shape and pace of recovery in Lecta’s operating performance in 2021 on the back of sizeable conversion projects expected to start during 2021. “Furthermore, Moody’s expects the Moody’ s-adjusted Debt/EBITDA to remain sustainably above 7x in the next 12 to 18 months despite an increasing EBITDA contribution from the structurally more profitable specialty papers business segment,” the agency said.

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