CHICAGO (AP) - Fitch Ratings on Monday affirmed a stable ratings outlook for International Paper Co., a forest products, paper, and packaging company.
Fitch said the ratings is based on the company's size, its modest leverage and market position in a mature and competitive market.
Although the ratings agency said the company is one of the biggest paper companies in the world, it is 'largely dependent' on an industry with low growth potential in North America. That has been reflected in International Paper's share performance, the agency said.
International Paper has exceeded its own expectations in its asset sales program, collecting more than $11 billion in proceeds, Fitch said. The company has repaid $6.9 billion in debt, repurchased $1.4 billion of its common stock through 2006 and contributed $1 billion to its underfunded pension plans. The company is also looking to buy back stock this year and reinvest.
Fitch said the company needs to grow its core earnings to fits its downsized capital structure and become a solid investment grade company. To get there, it is looking to expand overseas, the agency said.
International Paper has invested $1.15 billion in an asset swap in Brazil and spent $110 million for a joint venture in China. It is also looking to buy half of Ilim Pulp, a forest industry company in Russia, according to Fitch.
However, the agency said the company's new investments may need time to incubate before their earnings can compensate for growth missing in the domestic markets.
Among the ratings affirmed are International Paper's 'BBB-' issuer default rating, 'BBB-' bank revolvers rating and 'BBB-' senior unsecured debt rating. BBB- is a long-term investment grade rating that essentially means it is satisfactory at the moment.
Shares of International Paper added 27 cents to close at $37.06 on the New York Stock Exchange.
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