Approximately $4.9 billion of rated debt affected
New York, April 19, 2011 -- Moody's Investors Service assigned a Baa2 rating to the new $2.0
billion senior secured credit facilities of Owens-Illinois Inc.
(OI) and affirmed the Ba2 corporate family rating and SGL-2 speculative
grade liquidity rating. The ratings outlook remains stable.
The new facility includes a $900 million multi-currency
revolver at Owens-Brockway Glass Container Inc. ("OBGC"),
an indirect wholly owned subsidiary of OI. The facility also includes
up to $1.1 billion of term loans at OBGC and OI's
European, Australian and Canadian subsidiaries, including
a $400 million delayed draw tranche. The proceeds of the
new facility will be used to refinance the existing revolver and term
loans.
Moody's took the following rating actions for Owens Illinois, Inc.:
- Affirmed Corporate Family Rating, Ba2
- Affirmed Probability of Default Rating, Ba2
- Affirmed $250 million senior unsecured notes due 2018,
B1 (LGD 6, 94%)
- Affirmed Speculative Grade Liquidity Rating, SGL-2
Moody's took the following rating actions for Owens-Brockway Glass
Container Inc.:
- Assigned $900 million senior secured multi-currency
revolver due 2016, Baa2 (LGD 1, 8%)
- Assigned $600 million senior secured term loan due 2016,
Baa2 (LGD 1, 8%)
- Affirmed $900 million senior secured first lien revolving
credit facility due 2012, Baa2 (LGD 1, 8%) (To be withdrawn
after the transaction closes)
- Affirmed $200 million ($190 million outstanding)
senior secured first lien term loan B due 2013, Baa2 (LGD 1,
8%) (To be withdrawn after the transaction closes)
- Affirmed EUR 225 million senior unsecured notes due 2014,
Ba3 ( LGD 5, 81% from LGD 5, 78%)
- Affirmed $400 million senior unsecured notes due 2014,
Ba3 ( LGD 5, 81% from LGD 5, 78%)
- Affirmed $600 million senior unsecured notes due 2016,
Ba3 ( LGD 5, 81% from LGD 5, 78%)
- Affirmed $607 million exchangeable senior unsecured notes
due 2015, Ba3 (LGD 5, 81% from LGD 5, 78%)
Moody's took the following rating actions for OI European Group BV (Netherlands):
- Assigned EUR 190 million senior secured term loan due 2016,
Baa2 (LGD 1, 8%)
- Affirmed EUR 200 million (EUR 190 million outstanding) senior
secured first lien term loan D due 2013, Baa2 (LGD 1, 8%)
(To be withdrawn after the transaction closes)
- Affirmed EUR 300 million senior unsecured notes due 2017,
Ba2 (LGD 3, 45% from LGD 3, 40%)
- Affirmed EUR 500 million senior unsecured notes due 2020,
Ba2 (LGD 3, 45% from LGD 3, 40%)
Moody's took the following rating actions for ACI Operations Pty.
Ltd. and O-I Canada Corp:
- Assigned AUD 180 million senior secured term loan due 2016,
Baa2 (LGD 1, 8%)
- Assigned CAD 120 million senior secured term loan due 2016,
Baa2 (LGD 1, 8%)
- Affirmed AUD 225 million (AUD 90 million outstanding) senior
secured first lien term loan A due 2013, Baa2 (LGD 1, 8%)
(To be withdrawn after the transaction closes)
- Affirmed CAD 138 million (CAD 111 million outstanding) senior
secured first lien term loan C due 2013, Baa2 (LGD 1, 8%)
(To be withdrawn after the transaction closes)
The ratings outlook remains stable.
The ratings are subject to the receipt and review of the final documentation.
RATINGS RATIONALE
The Ba2 Corporate Family Rating reflects OI's leading position in the
industry, wide geographic footprint and focus on profitability rather
than volume. The rating also reflects anticipated improvements
in credit metrics from recent acquisitions, cost-cutting/productivity
and cost pass-throughs. 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
faster growing emerging markets. The company's expansion
into faster growing emerging markets is also anticipated to help support
credit metrics. Liquidity is strong as the company has good free
cash flow, significant availability under its credit facility and
substantial cushion under its covenants.
The ratings are constrained by the concentration of sales, potential
acquisition risk 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 benefited from the growth
in premium beers. Additionally, OI generates approximately
76% of sales internationally while the majority of the interest
expense is denominated in U.S. dollars. The company
has disclosed its intention to continue to pursue acquisitions in emerging
markets which entails some level of risk despite the potential benefits.
What Could Change the Rating - Down
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 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
free cash flow to debt remains below 5.0%, debt to
EBITDA remains above 4.0 times, and/or the EBIT margin declines
below 13%.
What Could Change the Rating - Up
The ratings could be upgraded if there is evidence of a sustained improvement
in credit metrics within the context of a stable operating profile and
competitive position. Specifically, the ratings could be
upgraded if free cash flow to debt increases to greater than 9.0%
and the EBIT margin increases to above 14.0% and debt to
EBITDA declines below 3.75 times.
The principal methodology used in rating Owens-Illinois Inc.
was the Global Packing Manufacturers: Metal, Glass,
and Plastic Containers Industry Methodology, published June 2009
and Speculative Grade Liquidity Ratings Industry Methodology, published
September 2002. Other methodologies used include Loss Given Default
for Speculative Grade Issuers in the US, Canada, and EMEA,
published June 2009.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information and confidential and proprietary Moody's Investors
Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Edward Schmidt
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Glenn B. Eckert
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's rates Owens-Illinois's credit facilities Baa2, affirms Ba2 CFR, outlook stable