Fitch Affirms Potlatch Corp. Ratings at 'BB+'; Outlook Remains Positive

CHICAGO--(Business Wire)--Fitch Ratings has affirmed Potlatch Corporation's (PCH) senior
unsecured public and bank credit facility and Issuer Default Ratings
(IDR) of 'BB+'. The Rating Outlook remains Positive.

PCH has surprisingly managed to preserve credit measures since its
conversion to a Real Estate Investment Trust (REIT) despite the
spillover of the housing market's troubles into lumber and plywood.
Operating earnings of the Resource (timber harvesting) and Land Sales
and Development enterprises through last year's third quarter are well
ahead of 2006, largely on volumes, and the earnings momentum looks as
though it will continue into 2008, prompted by recent land
acquisitions. Pulp and paperboard earnings, which have been
periodically weak, have recovered with recent price increases in both
product lines and should also start out the year solidly. Consumer
Product earnings (tissue), which have been hurt by escalating pulp
prices, can look forward to some recapture with higher pricing in
2008. At question is a turn in fortunes for PCH manufactured lumber
and plywood whose mills are strategically linked to the company's
fiber basket. Although lumber and plywood are not likely to offset the
progress made in PCH's other business lines, their combined cash flow
plus cash from non-core timberland sales may not be great enough to
finance maintenance capital, shareholder distributions and an active
appetite for more timberland acquisitions, a difficult balancing act.

PCH's recent purchase of 179,000 acres of Idaho timberlands is
likely to push the company's net debt/EBITDA (rolling four quarters)
to around 2.0 times (x). Fitch does not expect this to change much
through 2008 (major land acquisitions aside) which by measured
comparison to its peers is a Positive Outlook.

PCH is a mid-sized, integrated forester and manufacturer of wood
and pulp based products. PCH's timberlands provide the majority of the
raw materials for the manufacture of lumber, plywood and
particleboard. PCH also makes pulp, paperboard and tissue and is a
leading producer of retail private-label tissue products.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
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Conduct' section of this site.

Fitch Ratings
Dennis L. Ruggles, CPA, +1-312-606-2318 (Chicago)
Sean T. Sexton, CFA, +1-312-368-3130 (Chicago)
Brian Bertsch, +1-212-908-0549
(Media Relations, New York)

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