Moody's affirms Potlatch

Moody's Investors Service said it affirmed Potlatch Corp.'s Ba1 senior unsecured debt, Ba2 senior subordinated debt and Ba2 rating on its 10% senior subordinated notes due 2011.

The outlook is stable.

The rating action follows a comprehensive review of the company's strategy and business plan, position in its markets, capital and debt structure, liquidity arrangements, dividend plans, anticipated performance and asset values, that was prompted, in turn, by the company's announcement of plans to convert to a real estate investment trust, the agency said.

Moody's said it concluded that the combination of pre-existing expected improvements in operating cash flow and the collateral value provided by the company's 1.5 million acre timberland position adequately offset concerns that internally generated cash flow would not always be able to cover the increased dividend resulting from the trust conversion.

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