Softer Housing Demand Triggers DBRS Downgrade of Norbord

In a statement released on Monday, credit rating agency Dominion Bond Rating Service [DBRS], warned that it has placed beleaguered Toronto-based Norbord Inc. (NBDFF.PK) under review “with negative implications."

Norbord is one of world’s largest producers of wood-based oriented strand board, or OSB, a building material used widely in housing construction. The company’s current corporate bond rating of BBB (low).

Significantly softer demand for OSB south of the border has taken a toll on the company, according to DBRS, helping to drive Norbord’s stock price to a 52-week low in mid-April.

The agency said:

A delayed recovery in the U.S. construction cycle, largely driven by the sub-prime mortgage collapse and the resulting large supply of unsold homes, is expected to keep demand for building products at low levels this year. This will result in 'a longer than expected time frame for the company to significantly repair its financial profile.'

Norbord had experienced strong demand from European markets last year, helping to offset the U.S. slowdown. Yet a worsening global credit crisis has slowed EU demand in kind, the agency added.

DBRS is expected to issue a new rating for the Norbord “within the next few weeks.”