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Rating Action:

Moody's revises Crown's outlook to positive, affirms Ba2, assigns Ba3 to new notes

19 Jan 2011

Approximately $3.7 billion of rated debt affected

New York, January 19, 2011 -- Moody's Investors Service ("Moody's") revised the ratings outlook of Crown, Cork & Seal Company, Inc. ("Crown") to positive from stable and affirmed the Ba2 Corporate Family Rating. Moody's also assigned a Ba3 rating to the new senior unsecured notes of Crown Americas, LLC and affirmed the SGL-2 speculative grade liquidity rating.

The rating assignment follows Crown's announcement that it intends to offer $700 million of senior unsecured notes due 2021 in a private placement. The proceeds of the issue will be used to retire all of the company's outstanding $600 million senior unsecured notes due 2015. The issuance will have a largely neutral effect on the company's credit metrics but will extend the maturity profile.

Moody's took the following rating actions for Crown Americas, LLC:

-Assigned $700 million senior notes due 2021, Ba3 (LGD 4, 65%)

-Affirmed $450 million US Revolving Credit Facility due 2015, Baa2 (LGD 1, 8% from LGD 1, 9%)

-Affirmed $130 million US Revolving Credit Facility due 2011, Baa2 (LGD 1, 8% from LGD 1, 9%) (LGD 1, 9%)

-Affirmed $365 million US Term Loan B due 2012 ($150 million outstanding), Baa2 (LGD 1, 8% from LGD 1, 9%)

-Affirmed $600 million senior unsecured notes due 2015, Ba3 (LGD 4, 65%) (To be withdrawn once the transaction closes)

-Affirmed $400 million senior unsecured notes due 2017, Ba3 (LGD 4, 65%)

Moody's took the following rating actions for Crown Cork & Seal Company, Inc.

-Affirmed corporate family rating, Ba2

-Affirmed probability of default rating, Ba2

-Affirmed speculative grade liquidity rating, SGL-2

-Affirmed $150 million senior unsecured notes due 2096 ($64 million outstanding), B1 (LGD 6, 94%)

-Affirmed $350 million senior unsecured notes due 2026, B1 (LGD 6, 94%)

Moody's took the following rating actions for Crown European Holdings S.A.

-Affirmed $700 million European revolving credit facility due 2015, Baa2 (LGD 1, 8% from LGD 1, 9%)

-Affirmed $63 million European revolving credit facility due 2011, Baa2 (LGD 1, 8% from LGD 1, 9%)

-Affirmed €111 million Euro Term Loan B due 2012, Baa2 (LGD 1, 8% from LGD 1, 9%)

-Affirmed €460 million 6.25% First Lien Notes due 2011 (€85 million outstanding), Baa2 (LGD 2, 11%)

-Affirmed €500 million 7.125% global notes due 8/15/2018, Ba1 (LGD 2, 26% from LGD 2, 27%)

Moody's took the following rating actions for Crown Metal Packaging Canada L.P.

-Affirmed $50 million Canadian revolving credit facility due 2015, Baa2 (LGD 1, 8% from LGD 1, 9%)

The rating outlook is revised to positive from stable.

RATINGS RATIONALE

The revision of the outlook to positive from stable reflects an expectation that Crown's credit metrics will improve sustainably to the stated rating triggers over the rating horizon. Much of the company's previous and planned capacity expansion in emerging markets is sold out and should drive measurable improvements in EBITDA and cash flow. Moreover, Moody's expects that the company will continue to maintain conservative financial policies.

Crown's Ba2 Corporate Family Rating reflects the company's position in an oligopolistic industry, relatively stable end markets and improved profitability. The rating is also supported by the high percentage of business under contract with strong raw material cost pass through provisions, higher margin growth projects in emerging markets and good liquidity. Crown's broad geographic exposure, including a high percentage of sales from faster growing developing markets, is both a benefit and a source of some potential volatility.

The rating is constrained by the company's concentration of sales, exposure to international markets and risks inherent in its strategy to grow in emerging markets. The rating is also constrained by the ongoing asbestos liability. The company has exposure to segments which can be affected by weather and crop harvests and to mature industry sectors like carbonated soft drinks. Approximately 40% of sales stem from beverage can segment. Crown is also completely concentrated in metal packaging, which may be subject to substitution with other substrates in certain markets depending on relative pricing and new technologies.

What Could Change the Rating - Down

The ratings could be downgraded if there was deterioration in the credit metrics, more aggressive financial policies, deterioration in the cushion under existing financial covenants, and/or deterioration in the competitive or operating environment. Specifically, the rating could be downgraded if the EBIT margin moved below the low teen range, leverage moved above 4.0 times and free cash flow to debt moved below 7%.

What Could Change the Rating - Up

The ratings could be upgraded if Crown achieves a sustainable improvement in credit metrics and maintains conservative financial policies and cushion under existing financial covenants within the context of a stable operating and competitive environment. Specifically, the ratings could be upgraded if leverage remained below 3.7 times, the EBIT margin remains in the double digits and free cash flow to total debt improves to over 9%.

The principal methodologies used in this rating were Global Packing Manufacturers: Metal, Glass, and Plastic Containers published in June 2009, Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009, and Speculative Grade Liquidity Ratings published in September 2002

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 revises Crown's outlook to positive, affirms Ba2, assigns Ba3 to new notes
No Related Data.
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​
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