Moody's might drop Packaging

Moody's Investors Service said it placed the Baa3 senior unsecured rating of Packaging Corp. of America under review for possible downgrade.

The review was precipitated by the company's announcement that it has signed a definitive agreement to acquire all of the common shares of Boise Inc. (including Ba2 rated indirect wholly owned subsidiary Boise Paper Holdings, LLC).

Moody's said the review will focus on the amount of acquisition debt financing taken on to fund the transaction; the ability of the combined company to de-lever through free cash flow generation; the size and pace of cost synergies that can be realized; post-closing credit metrics; the integration of Boise's paper business (which is in secular decline); and Packaging's ability to maintain strong liquidity.

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