Moody's lowers Lecta

Moody's Investors Service said it downgraded to Ca-PD from Caa2-PD Lecta Ltd.’s probability of default rating and affirmed the Caa2 long-term corporate family rating.

Concurrently Moody's affirmed the B3 rating of the €115 million backed senior secured bank credit facilities borrowed by Paper Industries Holding Sarl and affirmed the Caa3 rating of the €256 million backed senior secured notes issued by Paper Industries Intermediate Financing Sarl.

On Oct. 12, Lecta reported it reached an agreement with its largest shareholders and most of its creditors on a refinancing package. The package would extend the maturities of the €115 million of super senior debt to the first quarter of 2028, the exchange of the existing notes into a single tranche of €258 million of new senior secured notes maturing in the third quarter of 2028, with the company having the option to pay interest in-kind subject to meeting certain conditions, the issuance of a €78 million of new money facility and the issuance of warrants.

“Moody's considers the positive effect of the transaction, which, if successfully completed, would assist to resolve the company's liquidity issues and facilitate the transformation process towards specialty paper to be initially largely balanced by a further increase in debt which would negatively weigh on the capital structure. The downgrade of the PDR to Ca-PD from Caa2-PD reflects the increased probability of a default since the planned extension of debt maturities under the proposed transaction will be viewed as a distressed exchange by Moody's,” the agency said in a press release.

The outlook on all three entities remains negative.

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