Consolidated Papers Inc. CP Rated `F2' By Fitch IBCA.

NEW YORK--(BUSINESS WIRE)--Nov. 11, 1999--

Fitch IBCA initiates ratings coverage of Consolidated Papers Inc. (CDP) with the assignment of its commercial paper rating of `F2'. The company will put in place a new $700 million 4 (2) commercial program, which will be fully supported by its $700 million unsecured revolving credit agreement. CDP plans to use commercial paper to refinance existing debt, as well as fund working capital, capital spending and acquisitions.

The rating reflects the strong track record of profitability despite the cyclical nature of the industry, low cost position, leading market share in its core product lines, well developed distribution network and management's commitment to reduce debt. The rating also recognizes CDP's healthy profitability compared to its peers.

Concerns are centered on increased leverage from its capital expansion program in recent years and acquisitions, inherent cyclicality of the paper industry, and intense global competition due to lower priced imports.

Fitch IBCA believes the company will be able to reduce debt with free cash flow, which is likely to be substantial, as capital expenditures are not expected to remain at the high levels of the past three years. As a result, debtholder protection measures are likely to strengthen. Fitch IBCA would expect net debt-to-EBITDA to average just below 2.5 times (x). Going forward, Fitch IBCA expects CDP will scale back capital spending to approximate or equal depreciation. Operating performance is anticipated to improve due to the growth of new products, shift to lightweight coated specialty products, and cost reduction efforts, while moving away from lower margin business.

In recent years, paper prices in North America have shifted downward due to global overcapacity, a stronger U.S. dollar and weak economic conditions in Asia, South America and Russia. While demand is up in the U.S. due a strong economy, a glut of imports into the U.S. has pressured prices for U.S. paper companies. However, with continued U.S. economic growth, minimal expansion and a slowly improving Asian economy, a cyclical upturn is expected to occur in 2001 or in early 2002.

Leverage, as measured by net debt (total debt plus capitalized lease obligations less cash, and restricted cash for capital leases) to EBITDA, increased to 2.8 times (x) at Sept. 30, 1999, compared to 2.6x at year-end 1998. For the past 12 months ending, Sept. 30, 1999, EBTIDA coverage of net interest was 5.9x. At the same time, CDP generated $1.8 billion in revenues and $346 million in EBITDA, down from $419 million at year-end 1998. The decline in EBITDA and margins resulted from depressed market pricing for the first half of 1999 and poor demand. In order to keep inventory at manageable levels, CDP closed smaller less-efficient machines, which pressured margins.

Consolidated Papers, Inc., based in Wisconsin Rapids, WI, is North America's largest producer of coated and supercalendered paper, as well as the leading manufacturer of coated specialty papers, with capacity of more than two million tons per year. CDP's coated printing paper shipments represented almost 20% of the U.S. market in 1998. The company's complete line of printing papers (accounted for 88% of 1998 total sales) are used by printers and publishers for magazines, catalogs, corporate annual reports, brochures, advertising and direct mail materials.