Potlatch Corp. Outlook Revised To Positive From Stable On Acquisition Of Deltic Timber Corp.; #BB+# Rating Affirmed

Stocks and Financial Services Press Releases Tuesday October 24, 2017 09:24
NEW YORK--24 Oct--S&P Global Ratings

NEW YORK (S&P Global Ratings) Oct. 23, 2017-- S&P Global Ratings today revisedits rating outlook on Potlatch Corp. to positive from stable. At the sametime, we affirmed our ratings, including the 'BB+' corporate credit rating, onthe company.

Our ratings affirmation and outlook revision to positive reflect the proposedDeltic acquisition's significant addition to Potlatch's size and scale becauserevenues will increase by 37%, EBITDA by about 30% while adding 530 thousandacres of timberlands in Arkansas, bring Potlatch's total holdings to justunder 2 million acres. Potlach will also acquire two additional saw mills thatwill add 430 million board feet of lumber capacity (a 56% increase toPotlach's capacity) and will also add a medium density fiberboard (MDF) plant.

The positive outlook reflects the potential to raise Potlatch's ratings toinvestment grade (BBB-) given the company's increased size, timberlandsholdings, and earnings capacity after the Deltic acquisition. An upgrade wouldbe predicated on our view that the company will also maintain leverage metricsin the lower half of the 3x area or lower.

We could raise our rating on Potlatch to 'BBB-' over the next year if it issuccessful in integrating Deltic into its operations, achieving targetedsynergies of at least $50 million that demonstrates the company's improvedearnings breadth and stability. We expect that Potlatch will maintain debtleverage of 3x-3.5x while it integrates Deltic.

We could revise our outlook back to stable if Potlatch's acquisition of Delticis delayed or cancelled or if integration difficulties or reduced demand forlumber and saw logs causes Potlatch's leverage to rise toward 4X.


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