Carter Holt Harvey Rating Lowered To BBB By S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 7/20/98-- Standard & Poor's today lowered its long-term corporate credit and senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. ratings on Carter Holt Harvey Carter Holt Harvey is an Australasian forest products company, with significant interests in wood products, pulp, paper and packaging. The company employs approximately 10,500 people across Australasia. Ltd. (CHH CHH Cartilage Hair Hypoplasia CHH Crustacean Hyperglycemic Hormone CHH Carter Holt Harvey Limited (Australia & New Zealand) CHH Chuan Hup Holdings Limited (Singapore) CHH Certified Hardware Hosineer ) to triple-'B' from triple-'B'-plus and revised the rating outlook to negative from stable (see table below). Standard & Poor's also affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. its 'A-2' commercial paper rating on the company. This rating action reflects ongoing weakness in regional timber and paper markets; acute pricing pressures in the Australasian packaging market; weak credit protection measures; and the rating downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. on CHH's major shareholder, International Paper, to triple-'B'-plus/Stable/'A-2' from single-'A'-minus/Watch Neg/'A-2' (see related release), reducing that company's ability to provide support to CHH. With the economic recession gripping Asia likely to be deeper and more protracted pro·tract tr.v. pro·tract·ed, pro·tract·ing, pro·tracts 1. To draw out or lengthen in time; prolong: disputants who needlessly protracted the negotiations. 2. than previously anticipated, CHH earnings, margins, and cash flow protection measures likely will be weak for the next two-to-three years. Operating in highly cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. forest product markets and exposed to currency fluctuations, CHH is able to sustain an investment-grade rating as a result of its moderate cost position, high degree of vertical integration, good Australasian market position in several core products, and moderate debt usage. Further, CHH's strategic importance to International Paper and that company's global strategy give International Paper a strong economic incentive to support CHH, and allows CHH access to International Paper's technological expertise and other resources. CHH's growth and earnings prospects, however, will depend on modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, of its Kinleith pulp and paper mill resulting in cost efficiencies and higher production volumes, and increasing harvest volumes (from the improving maturity profile of its large forest estate). While investment in additional processing capacity should enable CHH to extract greater value and cash flow from the forest estate, returns also will become more volatile as the company's exposure to export markets grows. Price and volume pressures in the majority of CHH's end markets likely will see funds from operation-to-debt remain below 20%, and earnings before interest, tax, depreciation and amortization (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) interest cover remain below 3 times (x) (2.5x in 1998) in the next two-to-three years. CHH's leverage (debt-to-capitalization) is expected to remain moderate, fluctuating fluc·tu·ate v. fluc·tu·at·ed, fluc·tu·at·ing, fluc·tu·ates v.intr. 1. To vary irregularly. See Synonyms at swing. 2. To rise and fall in or as if in waves; undulate. v. 30%-35% (38.1% in 1998) in the medium term. The company's 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. and return on permanent capital will remain modest compared with those of most global peers, reflecting its significant investments in large forest plantations and in Chilean-based Compania de Petroleos de Chile S.A. (Copec, triple-'B'-plus/Stable/-), which only returns modest dividends. OUTLOOK: NEGATIVE. Credit protection measures remain vulnerable to ongoing Asian market uncertainties, and delays in pricing improvements in global pulp and paper markets, particularly as CHH becomes more exposed to global markets through increased exports. Should the likely benefits of the Kinleith upgrade not be realized in a timely manner, and cushion the company's financial performance against anticipated weak market conditions, another ratings downgrade may result, Standard & Poor's said. -- CreditWire -0-
RATINGS LOWERED, REVISED OUTLOOK
Carter Holt Harvey Ltd. To From
Corporate credit rating BBB/Neg/A-2 BBB+/Stable/A-2
US$150 mil. 7.625% notes
due 2002 BBB BBB+
US$350 mil. 8.875% notes
due 2004 BBB BBB+
US$150 mil. 8.375% notes
due 2015 BBB BBB+
US$150 mil. 9.5% note
due 2024 BBB BBB+
International Paper Co.
Corporate credit rating BBB+/Stable/A-2 A-/Watch Neg/A-2
CONTACT: Jeanette Ward, Melbourne (61) 3-9250-4582
Cynthia Werneth, New York (1) 212-208-1707
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