May 03, 2007. /Lesprom Network/. Standard & Poor's Ratings Services said on May 1, 2007 that it affirmed the ratings on Idaho-based paper and wood product manufacturer Boise Cascade LLC, and assigned its 'BB' bank loan rating and '2' recovery rating (indicating the expectation of substantial (80%-100%) recovery of principal in the event of a payment default) to the company's proposed $450 million first-lien credit facility, $525 million first-lien term loan and $200 million delayed-draw term loan. Boise will use the transaction to reduce its existing $475 million revolver, refinance the $840 million ($539 million remaining) term loan, and partially fund the repurchase of bonds in October 2007. The affirmation reflects our expectations that credit measures will remain appropriate for the current ratings despite the company's weakened end-markets. Boise's debt, including capitalized operating leases and tax-effected underfunded pension and postretirement obligations, was approximately $1.37 billion at December 31, 2006. "The ratings on Boise reflect its participation in the cyclical paper and wood products manufacturing markets, concerns about declining paper demand because of competing technologies and product substitution risks, competition with larger manufacturers that have more attractive cost positions, and aggressive debt leverage," said Standard & Poor's credit analyst John Kennedy. "Partially offsetting these negative factors are the company's product diversity and growing value-added product mix, a relatively stable building products distribution business, and a manageable debt maturity schedule." The outlook is stable. Favorable near-term prospects for paper products markets allowed Boise to generate free cash flow for debt reduction in 2006 and improve its aggressive capital structure. In addition, its diverse product mix and growing valued-added portfolio should enable it to weather cyclical downturns, limiting downside ratings risk. However, we could revise the outlook to negative if concurrent downturns occur in the company's product segments, if there is a loss of revenue from OfficeMax Inc., or if Boise adopts a more aggressive financial policy. We do not expect to revise the outlook to positive in the near term, because of the company's aggressive leverage and potential for permanent structural declines in demand for the company's primary paper and wood products offerings. Boise Cascade is an international distributor of office supplies and paper and integrated manufacturer and distributor of paper, packaging, and building materials.