Moody's: Significant deterioration in credit quality of global forest product sector

"Negative rating pressure has arisen from two sources. The material structural changes at play in the industry today are likely to remain key credit risk considerations for the next years. These include stagnant or decreasing demand in mature markets owing to digital substitution, competition from new capacity in developing markets, elevated costs for key inputs and shifting currency exchange rates,"

says Martin Kohlhase, a Moody's Assistant Vice-President -- Analyst and co-author of the report.

Apart from structural changes, there are a number of indicators which Moody's believes mean that producers of communication paper are likely to enter a period of cyclical weakness with lower economic activity over the coming quarters.

"Against this environment, both liquidity and refinancing are increasingly becoming a concern as more issuers depend on asset sales to address upcoming debt maturities and cash flow generation remains weak or weakens further," Mr. Kohlhase adds.

In the report, entitled "EMEA Paper and Forest Products: From Investment Grade to High Yield", Moody's explores the structural challenges the sector is facing, and suggest that these will be exacerbated by cyclical changes. According to the rating agency, this means that negative pressure on ratings for the European paper and forest products industry will persist.