Jun 10, 2005. /Lesprom Network/. Standard & Poor's Ratings Services said today that it lowered its corporate credit and other ratings on pulp and lumber producer Pope & Talbot Inc. to 'BB-' from 'BB' and placed them on CreditWatch with negative implications. "The rating action reflects Portland, Ore.-based Pope & Talbot's stubbornly high debt level and our expectation of negative free cash flow for 2005, given the recent decline in northern bleached softwood kraft (NBSK) pulp prices and the strong Canadian dollar," said Standard & Poor's credit analyst Dominick D'Ascoli. "We have become increasingly concerned about the competitiveness of Canadian pulp producers, considering the relative exchange-rate disadvantage, and debt, which rose $37 million in April with the acquisition of the Fort St. James sawmill. We are also concerned about the ramp-up of new European and South American pulp capacity that is likely to dampen pricing improvement." The majority of the company's costs are paid in the Canadian dollar, which has appreciated 23% against the U.S. dollar over the past three years, while the majority of Pope & Talbot sales are in U.S. dollars. Ratings will remain on CreditWatch with negative implications pending our review of the company's cash flow generating capacity. Some factors to be considered include Pope & Talbot's intention to issue common stock in the near future and the uncertainty surrounding the potential refunding of duties on softwood lumber imported to the U.S. from Canada.