Moody's rates Innovia loans B2

Moody's Investors Service said it assigned a B2 corporate family rating and a B2-PD probability of default rating to Innovia Group (Holding 3) Ltd. and a provisional B2 rating to Innovia Group (Finance) plc's proposed €340 million senior secured floating-rate notes due 2020. The outlook is stable.

The company will use the proceeds to refinance existing debt, including €85 million of outstanding shareholder loans.

The agency said Innovia's B2 corporate family rating incorporates the company's significant leverage following the refinancing; its exposure to volatile raw material costs, which has negatively affected margins in the past; its need for investments to support growth, which will weigh on free cash flow generation over at least 2014-15; and its concentrated customer base.

However, the rating is supported by Innovia's solid position in its niche markets for BOPP packaging and polymer substrate used for bank notes, and its more profitable security division supports margins and provides for some diversification, Moody's said.

Moody's estimates that as of December, Innovia's pro forma ratio of debt to EBITDA will be close to 5x.

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