S&P cuts Rock-Tenn notes to B+, rates loans BB

Standard & Poor's said it affirmed its BB corporate credit rating on Rock-Tenn Co. and lowered its senior unsecured ratings to B+ from BB on Rock-Tenn's 7¼% notes due Aug. 1, 2005, 8.2% notes due Aug. 15, 2011 and 5 5/8% notes due March 15, 2013.

S&P said the ratings on the notes were lowered because they are in a disadvantaged position compared to the company's proposed $700 million credit facility, because of operating subsidiary guarantees on the proposed credit facility.

All the ratings were removed from CreditWatch negative where they had been placed on April 28. At that time, Rock-Tenn announced the $540 million primarily debt-financed acquisition of unrated Gulf States Paper Corp.'s pulp, paperboard and packaging businesses. The outlook is negative.

At the same time, based on preliminary terms and conditions, S&P assigned its BB bank loan rating to the company's proposed $700 million senior unsecured credit facility, consisting of a $250 million term loan and a $450 million revolving credit facility.

Rock-Tenn is expected to use the proceeds from the credit facility to fund the acquisition and retire its $75 million revolving credit facility.

S&P said the ratings on Rock-Tenn reflect modest and declining operating margins and aggressive financial leverage pro forma for the acquisition.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.