Moody's boosts Berry Global

Moody's Investors Service said it upgraded Berry Global Group Inc.'s corporate family rating to Ba1 from Ba3 and probability of default rating to Ba1-PD from Ba3-PD. Moody's also raised the ratings on subsidiary Berry Global Inc.’s first-lien senior secured term loan and notes to Ba1 from Ba2 and the rating on the company's second-lien senior secured notes to Ba2 from B2. Finally, Moody's upgraded Berry's Speculative Grade Liquidity Rating to SGL-1 from SGL-2.

“The upgrade of the CFR reflects Moody's expectation that Berry's debt to LTM EBITDA will decline to 4x by the end of 2022 from 4.7x at April 3, 2021. The decline in leverage will be driven primarily by the dedication of free cash flow to debt reduction. Free cash flow to debt is also expected to improve to over 10% from 8.7%,” the agency said in a press release.

“The one notch upgrade of the rating on the company's first-lien senior secured term loan and notes, despite the two-notch upgrade in the CFR, reflects the reduction in second-lien debt that would absorb losses ahead of first-lien creditors. The three notch upgrade in the second-lien senior secured facilities reflects the improvement in recovery expectations given the significant reduction in the amount of second-lien debt in the capital structure. Moody's expects Berry to continue to repay higher coupon second-lien debt or refinance it with cheaper first-lien debt over the next 18 months,” Moody’s said.

The outlook for Berry is stable.

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