S&P places Potlatch on creditwatch with negative implications because of weaker expected credit ratios

Audrey Dixon

NEW YORK , December 5, 2011 (press release) – U.S. forest products company Potlatch Corp. announced today that its Board of Directors has approved the company's plan to temporarily reduce harvest levels by 15% and lower its annual dividend as a result of continuing weak housing market conditions.
We are placing the ratings on Potlatch, including the 'BB' corporate credit rating, on CreditWatch with negative implications.
In resolving the CreditWatch placement, we will meet with management to review its near-term operating and financial strategies, including any potential changes to its financial covenants, given the still challenging housing end markets.

Standard & Poor's Ratings Services said today it placed its ratings on Spokane, Wash.-based Potlatch Corp. on CreditWatch with negative implications, including the 'BB' corporate credit rating.

"The CreditWatch listings follows Potlatch's announcement that its Board of Directors has approved the company's plan to temporarily reduce harvest levels by 15% to 3.5 million tons and lower its annual dividend as a result of continuing weak housing market conditions," said Standard & Poor's credit analyst Tobias Crabtree. As a result of the decline in planned harvest levels, we are revising our outlook for Potlatch's near-term profitability and expect credit measures for 2012 to be weak for the existing 'BB' rating.

Potlatch's current credit agreement requires a funded indebtedness to capitalization ratio of 70% or less, collateral coverage of 3x or more, and a minimum interest coverage ratio of 3x.

Potlatch is a U.S. timber real estate investment trust (REIT) that owns and manages approximately 1.45 million acres of timberlands in Arkansas, Idaho, and Minnesota.

In resolving the CreditWatch placement, we will meet with management to review its near-term operating and financial strategies, including any potential changes to its financial covenants, given the still challenging housing end markets.

RELATED CRITERIA AND RESEARCH
Industry Report Card: A Weak Economy Clouds Prospects For U.S. Natural Resources, Oct. 4, 2011.
Issuer Ranking: North American Forest Products Companies, Strongest To Weakest, Oct. 4, 2011.
2008 Corporate Criteria: Analytical Methodology, April 15, 2008.

Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.

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