Fitch affirms Owens-Illinois

Fitch Ratings said it affirmed Owens-Illinois Inc.'s B- issuer default rating, CCC+/RR5 senior unsecured notes and CCC/RR6 preferred stock and Owens Brockway Glass Container Inc.'s B- issuer default rating, BB-/RR1 senior secured credit facilities and senior secured notes and B/RR3 senior unsecured notes.

The outlook is stable.

On Jan. 12, Owens-Illinois announced it was reviewing strategic options for its plastics business, including a possible sale. Fitch said that depending on the use of the proceeds, the potential sale of the plastics business could have a meaningful impact on the company's credit metrics and the company's ratings or outlook could be positively affected if a transaction is executed.

The agency said the ratings are supported by the company's leading market positions, global footprint, technology leadership and long-term customer relationships with large, stable customers. New asbestos claims and asbestos cash payments continue to decline steadily, Owens-Illinois has improved its working capital management and with the company's second-quarter 2006 bank facility refinancing, liquidity has improved, the need for currency hedging has been reduced and interest expense has been lowered.

Increasing energy costs and other cost inflation are primary concerns, according to Fitch. Although Owens-Illinois has made progress on improving price, reducing costs and boosting productivity, raw materials and energy inflation have more than offset these gains in recent quarters, and although the gross debt-to-EBITDA ratio declined to 4.5x for 2006 from 5.2x for 2003, the company's cash flow has deteriorated.

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