Fitch rates Smurfit Kappa

Fitch Ratings said it assigned an expected senior unsecured rating of B+ to the Smurfit Kappa Group, the entity to be created through the acquisition of Kappa Packaging by Jefferson Smurfit Group (JSG).

At the same time, the agency said it assigned a BB expected rating to the proposed new senior secured facilities for the combined Smurfit Kappa Group, reflecting Fitch's view of significant recoveries available to senior lenders in a distress scenario.

Following completion of the acquisition, Fitch noted it expects to affirm the ratings of the JSG Funding plc senior notes at B, the JSG Funding senior subordinated notes at B- and the JSG Holding plc senior PIK notes at CCC+.

"The ability of the group to deliver synergies and realize cash from disposals within a 12-24 month timeframe will be key to the maintenance of the expected B+ rating," said Michelle De Angelis, associate director in Fitch's leveraged finance group.

"The European paper and packaging market has yet to exhibit any significant signs of recovery, which means that the Smurfit Kappa Group will be embarking on a business restructuring program and inevitably incurring additional costs at a time when cash-flow generation is under continued pressure."

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