DBRS Downgrades Catalyst Paper Corporation’s Issuer Rating to C, Under Review With Negative Implications

DBRS has today downgraded the Issuer Rating of Catalyst Paper Corporation (Catalyst or the Company) to C from CCC (high). This action follows the Company’s announcement on December 15, 2011, that it would defer interest payment of USD 21 million on its 11% Senior Secured Notes due 2016, pending finalization of its strategy regarding its debt structure.

At the same time, DBRS downgraded the rating on Catalyst’s Senior Secured Debt to CC (low) from B (its recovery rating remaining unchanged at RR2) and the rating on its Senior Debt to C (low) from CCC (low) (its recovery rating remaining unchanged at RR6).

DBRS has also placed all the above ratings Under Review with Negative Implications. The rating action reflects the heightened risk of a potential default should the Company fail to resume interest payments as originally agreed at the end of the 30-day grace period. Such failure would also trigger an event of default under the Senior Secured Debt and potentially a cross-default event under the Senior Debt.

If Catalyst remains unable to pay the interest at the end of the grace period, DBRS would then lower the Company’s ratings to D. Alternatively, if the Company is able to avoid an event of default, we would review the options available to it and reassess its ratings at that time.

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

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

This is a Corporate (Forest Products) rating.