Bloomberg News

M-real Has Credit Rating Cut by S&P; Outlook Negative

August 04, 2006

M-real Oyj, Finland's third-biggest papermaker, had its credit rating cut one level by Standard & Poor's Ratings Services because of the company's weak financial performance and ``tough'' market outlook.

M-real's long-term rating was lowered to B+ from BB-, already below investment grade, S&P said today in a statement. M-real, with debts of 2.69 billion euros ($3.4 billion), has been removed from CreditWatch, S&P said.

``The rating action reflects M-real's continued operating and financial underperformance, a negative revision of financial expectations, and a weakening liquidity position,'' S&P said. ``Market conditions remain tough, with essentially flat prices, despite escalating input costs.''

M-real in July reported a second-quarter loss of 102 million euros on costs from job cuts and the disposal of a factory in France, and predicted its fourth straight annual loss. The Espoo, Finland-based company said in a separate statement that the downgrade by S&P will have an annual impact of 1.3 million euros on its financing costs.

The B rating on short-term corporate debt was affirmed, though the outlook is negative, S&P said.

The papermaker's shares had dropped 6 cents, or 1.7 percent, to 3.43 euros. They've slipped 19 percent this year.

To contact the reporter on this story: Daniel Frykholm in Stockholm at

To contact the editor responsible for this story: Chris Jasper at

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