Moody’s lowers Lecta

Moody's Investors Service said it downgraded to Caa2 from Caa1 the long-term corporate family rating and to Caa2-PD from Caa1-PD the probability of default rating of Lecta Ltd. Concurrently Moody's lowered to B3 from B2 the rating of the backed senior secured bank credit facilities borrowed by Paper Industries Holding Sarl and to Caa3 from Caa2 the rating of the €256 million of backed senior secured notes issued by Paper Industries Intermediate Financing Sarl. The outlook on all three entities has been changed to negative from stable.

"Moody's decision to downgrade the ratings of Lecta by one notch and to change the outlook on its ratings to negative reflects a material weakening in Lecta's operating performance since Q4 2022 due to a substantial revenue decline driven by destocking affecting not only Lecta but the whole paper industry," explained Oliver Giani, a Moody's vice president, senior analyst and lead analyst for Lecta, in a press release.

"Management responded swiftly to the change in demand and aligned production accordingly. However, the 41% volume decline seen in Q1 2023 resulted in a net loss for the quarter, key credit metrics weakened materially from their peak in Q3 2022 making it increasingly difficult for Lecta to refinance its upcoming debt maturities. The rating committee considered the increased likelihood of a debt restructuring as a governance risk and changed the financial policy score under Moody's paper and forest products rating methodology to Caa from B," Giani added.

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