Moody's gives Reynolds loan Ba3, notes Ba3, Caa1

Moody's Investors Service said it confirmed the B2 corporate family rating of Reynolds Group Holdings Ltd. and concluded a review that began in June following news that Reynolds signed a definitive merger agreement to acquire Graham.

The agency also said it assigned provisional ratings to the proposed acquisition financing, including provisional Ba3 ratings to the $2 billion senior secured term loan due 2018 and $1.5 billion of senior secured notes due 2018 proposed by Reynolds and certain of its subsidiaries.

The outlook is negative.

Moody's also said it assigned a provisional Caa1 rating to the $500 million of senior unsecured notes due 2019 proposed by Reynolds and certain of its subsidiaries.

If the transaction closes as proposed, the existing Graham Packaging Co. LP's senior unsecured notes, $250 million due 2017 and $250 million due 2018, will be confirmed at Caa1.

Moreover, the existing Graham $375 million subordinated notes due 2014 also will be confirmed at Caa1 and the B2 corporate family rating and review for downgrade will be withdrawn.

The ratings on Reynolds' existing debt issues are not expected to change, but LGD rates of existing debt issues will likely change once the new debt has been issued and definitive ratings have been assigned, the agency said.

The ratings reflect Reynolds' weak pro-forma credit metrics, integration risk and limited operating history for the combined entity, Moody's said.

The ratings also consider the company's lengthy raw material cost pass-through provisions, concentration of sales within certain segments and financial aggressiveness, the agency added.

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