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S&P affirms Ball; downgrades Rexam, debt
S&P said it affirmed all of its ratings on Ball Corp., including its BB+ corporate credit rating.
The outlook is negative.
At the same time, the agency lowered its corporate credit rating on Rexam plc and its issue-level ratings on the company's senior unsecured debt to BB+ from BBB- to reflect the entity's status as a core operating subsidiary of Ball.
S&P downgraded its short-term rating on Rexam to B from A-3 because it now rates the company as speculative grade.
The agency also withdrew its senior unsecured ratings on Rexam's credit facility, as it expects that facility to be repaid. S&P expects that Rexam's unrated private placement notes will be paid off within the next month, so it did not factor that debt into its recovery analysis.
Additionally, the agency lowered its issue-level rating on Rexam's 6¾% hybrid subordinated notes due 2067 by two notches to B+ from BB because of its hybrid criteria. The criteria indicate that it should initially lower the rating on this debt by two notches from the corporate credit rating on the issuer for subordination before applying an additional one-notch reduction for the deferability of interest payments. The notes' terms include a change-of-control provision that increases the applicable interest rate by 5%, so S&P anticipates that the company will elect to call the notes soon.
"The affirmation reflects our belief that Ball will smoothly integrate the $8.5 billion Rexam acquisition and achieve operating and cost synergies that will allow it to maintain a funds from operations (FFO)-to-debt ratio in the 12%-20% range," S&P credit analyst James Siahaan said in a news release.
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