S&P Downgrades Clearwater Paper to 'B+' on Weak Outlook

S&P Lowers Clearwater Paper's Rating to 'B+'

S&P Global Ratings has downgraded Clearwater Paper Corp. to ’B+’ from ’BB-’, assigning a negative outlook due to the company's weaker-than-expected performance. The agency anticipates the company’s S&P Global Ratings-adjusted leverage will exceed 4x for the next 12 months primarily because of weak earnings.

Market Pressures and Financial Projections

The downgrade reflects challenges from increasing oversupply in the U.S. solid bleached sulfate paperboard market, which is expected to pressure industry pricing. S&P projects Clearwater's adjusted EBITDA will be approximately $87 million. With adjusted debt around $375 million, its debt-to-EBITDA ratio is forecast to be in the 4x-5x range by the end of 2026.

Cash Flow and Operational Challenges

High capital expenditure needs continue to strain cash flow. While the company is expected to reduce capex to about $70 million in 2026 from roughly $100 million annually, cash flow deficits remain a risk. S&P forecasts facility utilization rates around 85%, below the normal 90%-95%, limiting the company's ability to increase prices.

Outlook Summary

Near-term industry demand is expected to lag available supply, keeping Clearwater's margins under pressure. The negative outlook reflects risks tied to weak cash flow and high leverage in a competitive market, with significant debt maturities in 2026 and 2028.

FAQ

Q: Why was Clearwater Paper downgraded by S&P?
A: The company was downgraded due to weak performance, with expectations that its adjusted leverage will surpass 4x amid market oversupply and pricing pressure.

Q: What is Clearwater Paper's new credit rating?
A: The new S&P credit rating is 'B+' with a negative outlook, revised down from 'BB-'.

Source: Investing.com