S&P: PaperWorks lowered, on negative watch

Standard & Poor's said it lowered its corporate credit rating on PaperWorks Industries Holding Corp. to B- from B.

At the same time, the agency said it lowered the issue-level rating on the company's senior secured term loan to B- from B. The recovery rating on the senior secured term loan is 3, indicating an expectation of meaningful recovery for investors in the event of a default.

In addition, all ratings were placed on CreditWatch with negative implications.

S&P said the downgrade and CreditWatch listing reflect the agency's revised assessment of PaperWorks' liquidity to "less than adequate" from "adequate" as a result of the increased likelihood that the company may need to address compliance with its covenants in the near-term.

"We believe that sluggish demand for the company's paperboard products along with cost pressures contributed to weaker-than-expected cash flow and a deterioration in covenant cushion with the potential for a covenant breach," said S&P credit analyst Tobias Crabtree in a news release.

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