DBRS Confirms Weyerhaeuser at BBB (high) and R-2 (high)

Dominion Bond Rating Service (“DBRS”) has today confirmed the above ratings of Weyerhaeuser Company (“WY” or the “Company”) and Weyerhaeuser Real Estate Company at BBB (high) and R-2 (high). The trends remain Stable.

The Company’s financial profile improved in 2004 and 2005 as exceptionally strong residential construction repair and remodelling activity produced a surge in building products demand and pricing. High operating earnings and proceeds from divestitures (i.e. timberlands) enabled WY to reduce total debt by US$3.4 billion in the 21-month period ending September 30, 2005. A US$500 million debt repayment in Q4 2005 will further strengthen the Company’s credit profile. The Company has been diligent in raising funds to reduce debt that was incurred in 2002 to finance the acquisition of Willamette Industries, Inc.

DBRS notes that although earnings from building products in 2005 and 2006 are expected to be less than peak 2004 levels, lower debt levels and a strong earnings contribution from timberlands and real estate are expected to positively impact credit metrics. Earnings and cash flows are also expected to benefit from a gradual recovery in pulp and packaging markets. As a result, barring a North American recession or a major acquisition, WY’s financial profile is expected to improve. Net debt percentages are expected to return to a 35%-40% range by the end of 2006.

DBRS notes that WY has a high earnings leverage to pulp, paper, and packaging, providing the Company with strong earnings potential when market conditions strengthen. The Company’s Timberlands business segment has a long history of generating stable and strong earnings and cash flows. WY has good liquidity, with cash and short-term unused bank facilities of US$2.4 billion at September 30, 2005. In addition, the potential return of US$330 million of lumber duties would provide additional funds to strengthen balance sheet. Furthermore, WY has additional financial flexibility in the form of saleable timberland assets. The estimated private timberland market value of US$5 billion or more (approximately 60% of WY’s total debt at September 30, 2005) represents an asset that can be easily monetized and provides support to the Company’s long-term debt.

Notes:
The rating for Weyerhaeuser Real Estate Company is based on an unconditional guarantee for indebtedness provided by Weyerhaeuser Company.
Issuer ratings apply to all general senior unsecured obligations of the issuer in question.