Domtar Comments on Moody Credit Rating Update

Press release from the issuing company

MONTREAL, May 22 - Domtar Inc. is pleased that Moody's has issued an Opinion Update. In it, Moody's stated that Domtar's credit ratings (Baa3 with stable outlook) "reflect the company's number three position in the North American uncoated freesheet market, its distribution franchise, a favorable cost position, and experience in completing acquisitions and reducing costs." "I am very pleased with Moody's update", said Raymond Royer, President and CEO of Domtar. "We remain focused upon maintaining our investment grade ratings, which are an integral part of our growth strategy", added Mr. Royer. Last August, Domtar acquired at a total purchase price of $US1.65 billion four paper mills in the United States on the strength of its balance sheet. At the time of acquisition, its debt-to-total capitalization was 65%; by March 31st, 2002, its debt-to-total capitalization had fallen to 55%. In conjunction with the acquisition, as of March 2002, Domtar had achieved a run rate of US$26 million of synergies and was committed to achieving an annualized run rate of US$65 million by the end of 2002.