Moody’s downgrades Owens-Illinois

Moody’s Investors Service said it downgraded the corporate family rating of Owens-Illinois Group, Inc. to B1 from Ba3 and the probability of default rating to B1-PD from Ba3-PD.

Moody’s also downgraded the rating on the company’s senior unsecured notes at subsidiary OI European Group BV to B1 from Ba3 and the senior unsecured notes at subsidiary Owens-Brockway Glass Container, Inc. to B3 from B1. The speculative grade liquidity rating is SGL-2. Moody’s revised the outlook to stable from negative.

“The downgrade of the CFR to B1 reflects Moody’s expectation that credit metrics will improve, but remain weak over the next 12 months as the company continues to struggle with sluggish end markets and the consequent low fixed cost absorption,” the agency said in a press release.

However, Moody’s said it forecasts debt to LTM EBITDA to improve to 5.2x and free cash flow to debt to be over 3.5% by the end of 2021.

The downgrade of the notes at Owens-Brockway to B3 from B1 reflects the increased incremental usage of the revolver in the loss given default methodology at the B1 CFR and the decline in the asbestos-related liability, Moody’s said.

The stable outlook reflects an expectation the company will dedicate free cash flow to debt reduction, realize the improvements in sales and margins, and achieve the projected progress in credit metrics, Moody’s said.

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