S&P puts Rock-Tenn on watch

Standard & Poor's said it placed Rock-Tenn Co.'s BB+ corporate credit rating on CreditWatch with negative implications and the BB- rating on the company's senior unsecured notes on CreditWatch with developing implications.

The CreditWatch placements follow the company's announcement that it agreed to acquire privately held Southern Container Corp. in an all-cash transaction for $993 million. Rock-Tenn plans to finance the transaction with a fully committed bank facility and new senior unsecured notes. Rock-Tenn will also refinance its existing bank facility.

The company plans to grant collateral to noteholders under the terms of the outstanding indentures. However, the agency said the CreditWatch listing reflects its current uncertainty regarding the extent of the contemplated collateral package relative to the proposed bank facility, which could have a meaningful impact on the recovery prospects for the notes.

Positively, Rock-Tenn will become more geographically diverse following the acquisition and should benefit from Southern Container's low-cost containerboard mill and modern corrugated box plant system, the agency added.

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