S&P assigns BB+ to Glatfelter's proposed US$200M senior unsecured notes due 2020, reflecting its view of company's business risk as 'fair' and financial risk as 'intermediate'
September 19, 2012
– Standard & Poor's Ratings Services said today it assigned its 'BB+' issue-level rating to U.S.-based P.H. Glatfelter Co.'s proposed $200 million senior unsecured notes due 2020. We also assigned our '3' recovery rating to the proposed notes, indicating our expectation for meaningful (50% to 70%) recovery in the event of default. For the complete recovery analysis, please see the recovery report on Glatfelter to be published shortly after this report on RatingsDirect. We expect the company to use proceeds to repay its $200 million senior notes due 2016.
Our 'BB+' rating on York, Pa.-based Glatfelter reflects our view of the company's business risk as "fair" and its financial risk as "intermediate". Our fair business risk assessment acknowledges the company's significant reliance on certain commodity-like specialty paper products, as well as its exposure to sometimes volatile input costs and selling prices. That said, the company is growing its exposure to more value-added niche products for which demand is growing.
Our intermediate financial risk assessment acknowledges Glatfelter's improved leverage profile with debt-to-EBITDA now below 2.0x and funds from operations to debt near 50%. This financial profile provides flexibility at the current rating level for leveraged investments that further expand the company's value-added segments where demand is growing.
Glatfelter produces paper and other products at its mills in North America, Germany, France, and the U.K. Its specialty papers segment accounts for roughly 55% of revenues and includes paper for trade book publishing and carbonless products that, in our opinion, face substitution risks. Glatfelter derives the rest of its revenue from its composite fibers segment (tea bags, coffee filters, and other products) and its advanced airlaid materials segment (feminine hygiene and other products). We view these businesses as having better long-term growth prospects.
John Piecuch, New York (1) 212-438-1579, firstname.lastname@example.org
James E Fielding, New York (1) 212-438-2452
Tobias F Crabtree, CFA, New York (1) 212-438-6503
Americas Media Relations: (1) 212-438-6667
Americas Customer Service: (1) 212-438-7280
Standard & Poor's Ratings Services, part of The McGraw-Hill Companies (NYSE:MHP), is the world's leading provider of independent credit risk research and benchmarks. We publish more than a million credit ratings on debt issued by sovereign, municipal, corporate and financial sector entities. With over 1,400 credit analysts in 23 countries, and more than 150 years' experience of assessing credit risk, we offer a unique combination of global coverage and local insight. Our research and opinions about relative credit risk provide market participants with information and independent benchmarks that help to support the growth of transparent, liquid debt markets worldwide.