Moody's ups Cellu Tissue outlook to stable

Moody's Investors Service said it restored the outlook for Cellu Tissue Holdings Inc. to stable from developing following the company's announcement that the merger between parent Cellu Paper Holdings Inc. and an afilliate of Kohlberg & Co. was terminated by mutual consent.

Ratings affirmed include the B2 corporate family rating, the B2 rating on the $162 million senior secured guaranteed 9¾% notes due 2010 rating and SGL-3 speculative grade liquidity rating.

Cellu Tissue's ratings reflect the modest scale of the company's operations, relatively weak balance sheet and price exposure to raw material and energy, significant competitive pressures, the ability of customers to bring production back in-house, a high degree of customer concentration and the likelihood of acquisitions, the agency said.

However, Moody's said the ratings are supported by the company's strong market position for several of its products, long-term customer relationships, relatively good cash flow generation and adequate liquidity.

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