S&P rates P.H. Glatfelter proposed notes 'BB+'
Sept 19 - Standard & Poor's Ratings Services said today it assigned its 'BB+' issue-level rating to U.S.-based P.H. Glatfelter Co.'s proposed $200 million senior unsecured notes due 2020. We also assigned our '3' recovery rating to the proposed notes, indicating our expectation for meaningful (50% to 70%) recovery in the event of default. For the complete recovery analysis, please see the recovery report on Glatfelter to be published shortly after this report on RatingsDirect. We expect the company to use proceeds to repay its $200 million senior notes due 2016. Our 'BB+' rating on York, Pa.-based Glatfelter reflects our view of the company's business risk as "fair" and its financial risk as "intermediate". Our fair business risk assessment acknowledges the company's significant reliance on certain commodity-like specialty paper products, as well as its exposure to sometimes volatile input costs and selling prices. That said, the company is growing its exposure to more value-added niche products for which demand is growing. Our intermediate financial risk assessment acknowledges Glatfelter's improved leverage profile with debt-to-EBITDA now below 2.0x and funds from operations to debt near 50%. This financial profile provides flexibility at the current rating level for leveraged investments that further expand the company's value-added segments where demand is growing. Glatfelter produces paper and other products at its mills in North America, Germany, France, and the U.K. Its specialty papers segment accounts for roughly 55% of revenues and includes paper for trade book publishing and carbonless products that, in our opinion, face substitution risks. Glatfelter derives the rest of its revenue from its composite fibers segment (tea bags, coffee filters, and other products) and its advanced airlaid materials segment (feminine hygiene and other products). We view these businesses as having better long-term growth prospects. Related Criteria And Research -- Credit Themes: The Outlook Is Stable For U.S. Forest Products; Macroeconomic Factors Pose Greater Risk Than Company Actions, July 25, 2012. -- Key Credit Factors: Criteria For Rating The Forest Products Industry, Dec. 11, 2009. -- Recovery Analytics Update: Enhanced Recovery Scale And Issue Ratings Framework, May 30, 2007 RATINGS LIST Glatfelter (P.H.) Co. Corporate credit rating BB+/Stable/-- New Ratings Proposed $200 mil sr unsecd nts due 2020 BB+ Recovery rating 3 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
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