Moody's rates Owens-Brockway notes Ba3

Moody's Investors Service said it affirmed the Ba3 corporate family and probability-of-default ratings of Owens Illinois, Inc. and assigned a Ba3 rating (LGD4, 59%) to the $300 million senior unsecured notes due 2016.

The notes are issued by Owens-Brockway Glass Container, Inc., an indirect wholly owned subsidiary of Owens-Illinois, Inc., and the proceeds will be used to repay Owens Illinois' $250 million of 7½% senior debentures due May 15, 2010 and for general corporate purposes.

Moody's also affirmed Owens Illinois' $500 million senior unsecured notes and debentures due in 2010 and 2018 at B2 (LGD6, 93% from 92%), and Owens-Brockway's $300 million senior unsecured notes due in 2016 at Ba3 (LGD4, 59%), $900 million senior secured first lien revolving credit facility maturing June 15, 2012 at Baa3 (LGD2, 11%), $200 million senior secured first lien term loan B due June 12, 2013 at Baa3 (LGD2, 11%), €225 million senior unsecured notes due Dec. 1, 2014 at Ba3 (LGD4, 59% from 57%) and $850 million senior unsecured notes due 2013-2014 at Ba3 (LGD4, 59% from 57%).

The outlook is stable.

The Ba3 corporate family rating reflects Owens Illinois' leading position in the industry, focus on debt reduction and strategic focus on pricing and cost cutting, the agency said.

The rating also reflects the company's wide geographic footprint and strong liquidity.

Ratings are constrained by the decline in volume resulting from the current economic climate, concentration of sales and the uncertainty surrounding the asbestos liabilities, the agency noted, as well as near-term limits to debt reduction stemming from the cash charges for asbestos, restructuring and pensions and the mature state of the industry.

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