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Moody's may downgrade Rock-Tenn
Moody's Investors Service said it placed the ratings of Rock-Tenn Co. under review for possible downgrade following the company's announcement that it signed a definitive agreement to acquire Southern Container Corp. for $851 million in cash and the assumption of $142 million in debt for a total purchase price of about $993 million. The transaction is subject to regulatory approvals and is expected to close in late March.
Ratings on review are the Ba2 corporate family and probability-of-default ratings, Ba2 (LGD3, 40%) senior unsecured bank credit facility and Ba3 (LGD4, 67%) senior unsecured bonds.
Rock-Tenn plans to finance the acquisition with proceeds from $1 billion in new credit facilities and with $400 million of unsecured notes. The incurrence of this debt will more than double the company's existing debt.
The agency said its review will focus on the proposed capital structure of the combined company, the integration process and the anticipated operating and financial performance of the combined company. The review will also assess the combined company's business prospects, cash flow, liquidity arrangements and management structure.
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