S&P cuts Kappa Beheer debt to B-

Standard & Poor's said it lowered its ratings on Kappa Beheer BV, including the long-term corporate credit rating to B+ from BB- and subordinated debt rating to B- from B.

All ratings were removed from CreditWatch, where they had been placed with negative implications on May 10, 2005.

The outlook is negative.

This action follows the signing of a definitive agreement for a merger of Jefferson Smurfit Group (B+/negative) and Kappa Packaging Group, of which Kappa Beheer is a holding company.

The ratings on Smurfit Kappa reflect its highly leveraged financial profile - including very weak cash flow coverage ratios and high debt levels and cyclical industry conditions - and challenges linked to the group's ability to successfully integrate the two entities and to realize expected synergies.

These risk factors are balanced by its leading position in the European containerboard/corrugated board markets, good geographical diversification and a high level of forward integrated operations.

Net debt to EBITDA is expected to be about 6.5x to 7.0x pro forma the merger in 2005 and is expected to improve to below 6x in 2006, the agency said.

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