DBRS Assigns Secured Debt Rating to West Fraser

DBRS has today confirmed the Issuer Rating of West Fraser Timber Co. Ltd.’s (West Fraser or the Company) at BB (high) with a Negative trend. At the same time, DBRS has assigned a rating of BB (high) with a Negative trend and a recovery rating of RR3 to the Company’s Secured Debentures following West Fraser’s announcement of an amendment to its existing credit agreement. DBRS believes that the amendment increases the Company’s financial flexibility to weather the current downturn in the forest product industry. Additionally, DBRS notes that changing the previously Unsecured Debentures into Secured Debentures has not affected the recovery potential of these debenture holders or their relative ranking with the bank debt. Hence, a recovery rating of RR3 remains appropriate. (See DBRS press release dated December 7, 2009 for details on the determination of the recovery rating.)

The Company today announced that it has concluded an amendment to its existing credit agreement which has a $600 million revolving term credit facility committed until March 31, 2012. The amendment raises the debt threshold to capitalization ratio, at which a specified interest coverage ratio must be met, from 37.5% to 42.5%. Under the terms of the amendment, West Fraser may incur or issue certain subordinated debt which is excluded from the calculation of this debt to capitalization ratio.

In connection with the amendment, the Company will provide security over substantially all of its property and assets in Canada and the United States. Pursuant to the terms of the indenture governing West Fraser’s US$300 million notes, West Fraser will, to the extent required, secure such notes equally with the credit agreement for so long as the credit agreement is secured. As a result of the amendment, the Company’s Unsecured Debentures have become Secured Debentures, and hence, necessitates DBRS to assign a new rating to the Secured Debentures and to discontinue the Unsecured Debentures rating.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodologies are Rating the Forest Products Industry and Rating Leveraged Finance, which can be found on our website under Methodologies.

This is a Corporate rating.