Moody's picks early lift for Carter Holt Harvey

Friday 14th December 2001

A debt ratings downgrade to near-junk bond status failed to shift Carter Holt Harvey's share price in early trading yesterday.

Moody's Investor Services on Wednesday downgraded Carter Holt's long-term debt to Baa3, just one notch above junk status.

It cited Carter Holt's weak cashflow and low return on assets.

It also blamed Carter Holt Harvey's relatively high level of dividend payout, which had reduced the forest products company's ability to fund expenditure and pay off debt.

But Moody's noted several of Carter Holt's key units had reached the bottom of the business cycle and could look forward to an earnings recovery in the short term.

The downgrade affects about $1.2 billion of debt.

Moody's said it expected Carter Holt Harvey to use about $200 million of cash on hand to partly pay back a $US150 million ($366 million) Yankee bond due in April.

"In Moody's opinion the company's debt level relative to its cyclical performance and cashflow is high for the original rating level," a statement said.

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