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S&P cuts Rock-Tenn notes to junk
Standard & Poor's said it lowered its corporate credit and senior unsecured notes ratings on Rock-Tenn Co. to BB from BBB- and placed them on CreditWatch negative.
The rating action followed the company's announcement that it will finance $490 million of the $540 million acquisition of unrated Gulf States Paper Corp.'s pulp, paperboard and packaging businesses with debt.
S&P said this transaction, which is expected to close in June, substantially increases Rock-Tenn's financial leverage. Pro forma for the transaction, total debt to EBITDA is approximately 4.5x for the 12 months ended Dec. 31, 2004.
While Rock-Tenn's business position will be improved by this transaction, S&P said the use of financial leverage is very aggressive.
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