Moody's may downgrade Longview Fibre

Moody's Investors Service said it placed Longview Fibre Co.'s Ba3 corporate family rating, Ba2 senior secured debt rating, B1 senior unsecured debt rating and B2 senior subordinated debt rating under review for possible downgrade.

The agency said the review reflects the uncertainty associated with the $1.3 billion takeover bid for Longview Fibre offered by the Obsidian Finance Group LLC, a private equity firm, and the Campbell Group LLC, a timber investment management organization.

The acceptance of the bid by Longview Fibre's board and the shareholders would be a credit negative and would likely lead to negative rating implications, Moody's said, based on the propensity of private owners to increase the leverage of acquired firms and the frequent use of secured debt for these purposes.

Despite the significant premium offered by these investors, the REIT has rejected the current offer of $26 per share. At the same time, Moody's said Longview has significant anti-takeover defenses in place, as it has a classified board and a shareholder rights "poison pill" provision. However, Longview Fibre is relatively widely held with directors and officers owning roughly 3.9% of shares and two institutional shareholders owning 8.5% and 6.8% of shares.

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