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Bond Market News
Domtar Downgraded to B+ by Fitch
February 6, 2026
Domtar Corporation was downgraded by a notch to B+ from BB- by Fitch. The downgrade reflects the company’s EBITDA leverage remaining above 4.5x, driven by weak Chinese demand for pulp and a delayed recovery in the US housing market. The leverage is expected to stay elevated above 5.0x with limited near-term deleveraging prospects despite cost reductions, according to Fitch. The pulp segment continues to face pressure from subdued Chinese demand, while wood products have returned to modestly positive EBITDA but are expected to improve only gradually. Paper & Packaging remains the primary source of earnings, partially offsetting weakness elsewhere. High interest rates and elevated Canadian lumber duties continue to weigh on housing-related demand and margins, prompting capacity curtailments. Liquidity is adequate at around $555mn as of end-September 2025, supported by lower maintenance capex, Fitch added. However, refinancing risk is rising, with $1.7bn of debt maturing in 2028, and Fitch expects refinancing at higher interest costs unless operating performance or leverage improves materially.
Domtar’s bonds traded stable with its 6.25% 2042s at 47 cents on the dollar.
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