DBRS Places Smurfit-Stone Container Corporation Under Review with Negative Implications

DBRS has today placed the rating of Smurfit-Stone Container Corporation (Smurfit-Stone or the Company) Under Review with Negative Implications. The rating action reflects the concern that worse-than-expected economic conditions will negatively affect the Company’s ability to meet its financial obligations in 2009 and the possibility that the Company may seek bankruptcy protection.

The deterioration in U.S. economic activity in the fourth quarter of 2008 resulted in a rapid decline in corrugated box shipments and demand for containerboard. With North American economic activity expected to remain weak through 2009, the demand for corrugated boxes and containerboard is unlikely to recover from currently depressed levels. While industry production curtailments are expected to bring supply in line with reduced demand, product prices are unlikely to increase from Q4 2008 levels and Smurfit-Stone’s revenues would be constrained to Q4 2008 levels through the year.

The depressed earnings and cash flows may require additional debt financing in distressed credit markets. The Company is highly levered, has weak credit metrics and also faces the challenge of refinancing its $800 million revolving credit facility in November 2009. DBRS will reassess the Company’s future prospects and the resulting impact on its rating after Smurfit-Stone releases its Q4 2008 financial statements.

Notes:
All figures are in U.S. dollars unless otherwise noted.

This rating is based on public information.

The applicable methodology is Rating the Forest Products Industry, which can be found on our website under Methodologies.

This is a Corporate rating.