Bowater Inc. & Avenor Inc. Ratings Affirmed by S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 10/20/98--Standard & Poor's today affirmed its ratings on Bowater Inc. and related entity (see list). The outlook is stable. The affirmation follows the announcement that Bowater will incur charges totaling $117.6 million after tax primarily to write down assets at its West Millinocket, Maine Millinocket is a town with a mill in Penobscot County, Maine, USA. The population was 5,203 at the 2000 census. It is home to a hospital. History It began with the selection of a site for the Great Northern Paper Company in 1899. Charles W. paper mill and recognize foreign currency exchange losses. In addition, the company has recorded an after-tax charge of $40 million to close the Gold River, B.C. pulp mill A pulp mill is a manufacturing facility that converts wood chips or other plant fiber source into a thick fiber board which can be shipped to a paper mill for further processing. (this will increase goodwill related to the recent acquisition of Avenor Inc.). Debt levels, which increased significantly with the recent acquisitions of Avenor and the Daebul, Korea newsprint newsprint low grade paper used for newspapers. Old newspapers are fed to cattle as an alternative roughage and may occasionally be ingested by dogs. Significant amounts of lead are accumulated in tissues; no cases of poisoning have been recorded in cattle, though it has been mill, are expected to be reduced with proceeds from the recent $523 million sale of the Dryden, Ontario Dryden (2006 population 8,195) is the second largest city in the Kenora District of Northwestern Ontario, Canada located on Wabigoon Lake. It is currently the smallest community in the province of Ontario designated as a city. uncoated free sheet mill and other potential asset monetizations. However, moderate share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. are also expected. Over the next few years, Bowater is expected to generate significant free operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. as newsprint and pulp markets gradually improve from weak levels and the benefits of integrating Avenor and Daebul operations are fully felt. Improvement in cash flow generation should occur despite elevated capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. to fund planned mill expansions. This should permit debt-to-capital, currently about 53% (net debt to capital is in the mid-40% area), to return to the 35% to 40% range, appropriate for the rating category. Funds from operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. to debt is expected to average 35% to 40% over the course of an industry cycle. OUTLOOK: STABLE A narrow focus on cyclical commodity products will result in high variability of credit protection measures over time. However, the company's fairly conservative financial policies, (as evidenced by its willingness to fund a meaningful portion of the Avenor acquisition with equity, and expected rapid debt reduction with proceeds of non-core asset sales) provide stability to credit quality, Standard & Poor's said.--CreditWire -0-
OUTSTANDING RATINGS AFFIRMED
Rating
Bowater Inc.
Corporate credit rating BBB
Senior unsecured debt BBB
Bank loan BBB
Preferred stock BBB-
Avenor Inc.
Corporate credit rating BBB
Senior unsecured debt BBB
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