Moody's rates Boise Paper notes B3

Moody's Investors Service said it assigned a B3 (LGD5, 84%) rating to Boise Paper Holdings, LLC's proposed $300 million senior unsecured notes due 2017 and upgraded its speculative-grade liquidity rating to SGL-2 from SGL-3.

The agency also affirmed the company's corporate family rating at B1 and its first-lien secured revolving credit facility, first-lien secured term loan A and first-lien secured term loan B at Ba3 (LGD3, 31%).

The outlook was changed to stable from negative.

Boise Paper, a wholly owned subsidiary of Boise Inc., plans to use existing cash and the proceeds from the proposed note offering to repay a portion of the first-lien term loan, repurchase the second-lien term loans and exercise the option to retire its seller's note.

The agency said the ratings reflect the company's market position as the third-largest producer of uncoated free sheet paper in North America and continued cost improvements over the intermediate term due to recent rationalization actions and reduced energy costs.

The ratings also incorporate declining product demand, high leverage during a slow economic recovery, high input cost exposure and recent price declines, Moody's said.

The SGL-2 rating indicates a good liquidity position over the next 12 months. The agency noted that Boise Paper reached an agreement to amend its first-lien credit agreement and change its leverage financial covenants to add a net first-lien leverage ratio of 3.25 times and to comply with a new total net debt leverage ratio of 4.75 times.

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