S&P rates Reynolds notes BB-

Standard & Poor's said it assigned an issue debt rating of BB- to the $1.5 billion of proposed senior secured notes due 2019 that entities of the Reynolds Group will issue into escrow.

The B+ corporate credit rating remains unchanged and all ratings remain on CreditWatch with positive implications.

The outlook is negative.

Upon closing of the Graham acquisition, these notes will become the joint obligation of Reynolds Group Issuer Inc., Reynolds Group Issuer LLC and Reynolds Group Issuer (Luxembourg) SA, according to an agency press release.

The 2 recovery rating indicates the expectation for 70% to 90% recovery.

S&P also assigned an issue rating of B- to the $500 million of proposed senior notes due 2019 that will become joint obligations of the same issuers. The 6 recovery rating indicates the expectation for 0% to 10% recovery.

Proceeds from the proposed note offerings, along with proceeds from a proposed $2 billion term loan as well as some cash on hand, will be used to finance the Graham acquisition.

"The ratings on Reynolds reflect its strong business risk profile as a premier provider of food and beverage packaging and a highly leveraged financial risk profile," S&P analyst Cynthia Werneth said in a statement.

The Graham ratings will be raised by one notch if the deal closes as structured and Graham's senior unsecured and subordinated notes remain in place, Werneth said.

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