Approximately $6.4 billion of rated debt securities affected
New York, October 27, 2016 -- Moody's Investors Service ("Moody's") assigned a Ba3 rating to the proposed
€600 million senior unsecured notes of OI European Group B.V.,
a subsidiary of Owens-Illinois Inc. ("OI"). The company's
Ba3 Corporate Family Rating (CFR), Ba3-PD Probability of
Default Rating (PDR) and other instrument ratings remain unchanged.
The rating outlook is stable. The proceeds from the new senior
notes will be used to repay term loan B due August 2022 as well as to
pay related fees and expenses.
OI's Ba3 corporate family rating, Ba3-PD probability
of default rating and other instrument ratings are unchanged as the transaction
is largely leverage neutral and Moody's expects the company will
continue to improve its operating results in the rating horizon.
Moody's took the following rating action:
Issuer: OI European Group B.V.
...Assigned €600 million Senior Unsecured Notes
due 2024, Ba3 (LGD3)
The following rating actions are unchanged:
Issuer: Owens-Illinois Inc.
...Ba3 Corporate Family Rating
...Ba3-PD Probability of Default Rating
...$250 million 7.8% Senior
Unsecured Notes due May 2018, B2 (LGD6)
...SGL-2 Speculative Grade Liquidity Rating
Issuer: Owens-Brockway Glass Container, Inc.
...$300 million Senior Secured Revolving Credit
Facility due April 2020, Baa3 (LGD2)
...$600 million Senior Secured Multicurrency
Revolving Credit Facility due April 2020, Baa3 (LGD2)
...$675 million Senior Secured Term Loan A
due April 2020, Baa3 (LGD2)
...$575 million Senior Secured Term Loan B
due September 2022, Baa3 (LGD2) (to be withdrawn at closing)
...$600 million Senior Secured Term Loan due
April 2020, Baa3 (LGD2)
...$300 million Senior Secured Delayed Draw
Term Loan due April 2020, Baa3 (LGD2)
...$300 million 5.375% Senior
Unsecured Notes due January 2025, B1 (LGD5)
...$500 million 5% Senior Unsecured
Notes due January 2022, B1 (LGD5)
...$700 million 5.875% Senior
Unsecured Notes due August 2023, B1 (LGD5)
...$300 million 6.375% Senior
Unsecured Notes due August 2025, B1 (LGD5)
Issuer: OI European Group B.V.
...€300 million Senior Secured Term Loan due
April 2020, Baa3 (LGD2)
...€330 million 4.875% Senior
Unsecured Notes due March 2021, Ba3 (LGD3)
...€500 million 6.75% Senior Unsecured
Notes due September 2020, Ba3 (LGD3)
The ratings outlook is stable.
The ratings are subject to the receipt and review of final documentation.
RATINGS RATIONALE
The Ba3 Corporate Family Rating reflects OI's leading position in the
industry, wide geographic footprint and continued focus on profitability
over volume. The company has led the industry in establishing and
maintaining a strong pricing discipline and improving operating efficiencies
which has had a measurable impact on its operating performance and the
competitive equilibrium in the industry. OI is one of only a few
major players that have the capacity and scale to serve larger customers
and has strong market shares globally, including in faster growing
emerging markets. The company has a wide geographic footprint and
the industry is fairly consolidated in many markets.
The ratings are constrained by the high concentration of sales,
high percentage of premium products and the asbestos liabilities.
The ratings are also constrained by the mature state of the industry,
cyclical nature of glass packaging and lack of growth in developed markets.
Glass is considered a package for premium products and subject to substitution
and trading down in an economic decline. OI is heavily concentrated
with a few customers in the beer industry and has a high concentration
of sales in mainstream bottled beer. Additionally, OI generates
approximately 70% of sales internationally while the majority of
the interest expense is denominated in U.S. dollars.
The ratings could be downgraded if there is deterioration in the credit
metrics, further decline in the operating and competitive environment,
and/or further increase in the asbestos liability. While further
large acquisitions are not anticipated, the rating and/or outlook
could also be downgraded for extraordinarily large, debt-financed
acquisitions or significant integration difficulties with any acquired
entities. Specifically, the ratings could be downgraded if
funds from operations to debt remains below 12.5%,
debt to EBITDA remains above 4.8 times, and/or the EBITDA
to interest expense remains below 4.0 times.
The ratings could be upgraded if there is evidence of a sustainable improvement
in credit metrics within the context of a stable operating profile and
competitive position. Specifically, the ratings could be
upgraded if funds from operations to debt increases to greater than 16%,
EBITDA to interest expense increases above 5.0 times and debt to
EBITDA declines below 4.0 times.
The principal methodology used in this rating was Packaging Manufacturers:
Metal, Glass, and Plastic Containers published in September
2015. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Headquartered in Perrysburg, Ohio, Owens-Illinois Inc.
("OI") is one of the leading global manufacturers of glass containers.
The company has a leading position in the majority of the countries where
it operates. OI serves the beverage and food industry and counts
major global beer and soft drink producers among its clients. Revenue
for the 12 months ended June 2016 was approximately $6.5
billion.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Edward Schmidt
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Brian Oak
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
