S&P lowers BWAY, rates loan B-, notes CCC

Standard & Poor’s said it lowered the corporate credit rating on BWAY Holding Co. and all related rated entities, including BOE Intermediate Holding Corp., BWAY Parent Co. Inc. and BWAY Corp. to B- from B.

The outlook is stable.

The agency also said it assigned a B- rating to the company’s proposed $1.1 billion senior secured term loan. The recovery rating is 3, indicating 50% to 70% expected default recovery.

S&P also said it assigned a CCC rating to the company’s proposed $770 million senior unsecured notes due 2021. The recovery rating is 6, indicating 0 to 10% expected default recovery.

As a part of this transaction, the agency also said it assigned a B+ rating to the company’s existing $200 million asset-backed lending facility. The recovery rating is 1, indicating 90% to 100% expected default recovery.

BWAY Holding Co. is issuing a $1.1 billion senior secured term loan and $770 million of senior unsecured notes. The company will use the $1.87 billion gross proceeds primarily to repay its existing term loan, senior notes and pay-in-kind notes and to pay a $200 million dividend to its shareholders.

The downgrade reflects increased leverage and a deterioration in credit measures after the proposed transaction, S&P said.

The agency said it expects leverage to rise to more than 8x with incremental debt of about $310 million after the proposed transaction.

Although S&P said it expects better operating trends, leverage is expected to remain elevated at more than 7x for the next few quarters.

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