Jun 18, 2007. /Lesprom Network/. Standard & Poor's Ratings Services said on June 15, 2007 that it lowered its ratings on Greenville, S.C.-based Bowater Inc., including its corporate credit rating, to 'B' from 'B+'. The outlook is negative. "The downgrade reflects our expectations for continued weak earnings and cash flow stemming from difficult newsprint market conditions, the rapid rise of the Canadian dollar, and ongoing operating losses for lumber," said Standard & Poor's credit analyst Pamela Rice. Standard & Poor's had previously expected Bowater's credit measures to improve modestly in 2007 as the company used asset-sale proceeds to reduce debt and reduced costs to offset lower prices. However, industry supply discipline in North America has not kept pace with demand declines, so prices remain under pressure. This rating action reflects the company's stand-alone credit quality and does not factor in the uncertain outcome of its proposed merger with Abitibi-Consolidated Inc., which still faces significant regulatory and shareholder scrutiny. "We could lower the ratings if the company is unable to strengthen its earnings and cash flow with cost improvement efforts or if market conditions worsen," Ms. Rice said. "We could revise the outlook to stable if Bowater is able to reduce debt beyond expectations and market conditions stabilize." Regulatory authorities and shareholders are still reviewing the proposed merger with Abitibi, and the effect on the companies' ratings is unclear. The all-equity transaction will result in a stronger competitive position and an improved cost profile for the combined entity, but the steady decline in demand for its core newsprint products and heavy debt burdens overshadow these strengths. Bowater Incorporated, headquartered in Greenville, South Carolina, is a leading producer of coated and specialty papers and newsprint. In addition, the company sells bleached market pulp and lumber products. Bowater employs approximately 7 000 people and has 12 pulp and paper mills in the United States, Canada and South Korea. In North America, it also operates one converting facility and owns ten sawmills. Bowater's operations are supported by approximately 763 000 acres of timberlands owned or leased in the United States and Canada and 28 million acres of timber cutting rights in Canada. Bowater common stock is listed on the New York Stock Exchange.