Fitch puts Kappa Packaging on positive watch

Fitch Ratings said it placed Kappa Packaging BV's ratings on Rating Watch positive following the announcement of the proposed merger between Jefferson Smurfit Group (JSG) and Kappa Packaging.

At the same time, the agency has affirmed the existing ratings and outlook of JSG.

Ratings placed on positive watch include Kappa Packaging's senior unsecured rating at B and senior secured rating at BB-; and Kappa Beheer BV's senior subordinated notes at B-. Ratings affirmed with a stable outlook include JSG Acquisitions' senior unsecured rating at B+ and senior secured rating at BB; JSG Funding plc's senior notes at B; JSG Funding plc's subordinated notes at B-; and JSG Holding plc's senior PIK notes at CCC+.

The proposed merger between JSG and Kappa will result in a refinancing of the senior secured facilities of both JSG and Kappa Packaging and all of the bonds at Kappa Beheer BV. JSG's bonds, debentures and securitization program are expected to remain in place.

"While leverage of the combined group will remain high overall, the proposed debt structure provides significant financial flexibility for the group in the near to medium term," says Michelle De Angelis, associate director in Fitch's Leveraged Finance Group. "This would represent a substantial improvement for Kappa Packaging in terms of debt amortization pressure, despite the expected increase in leverage from Kappa's current level, and forms the basis for the Positive Rating Watch."

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