Fitch upgrades Owens-Illinois

Fitch Ratings said it upgraded the ratings of Owens-Illinois, Inc. and its subsidiaries following the company's announced sale of its plastics business to Rexam, plc for $1.825 billion.

The agency upgraded the B issuer default rating to B from B-; Owens-Illinois' senior unsecured notes to B-/RR5 from CCC+/RR5 and preferred stock to CCC+/RR6 from CCC/RR6; Owens Brockway Glass Container Inc.'s senior secured credit facilities and notes to BB/RR1 from BB-/RR1 and senior unsecured notes to BB-/RR2 from B/RR3; and OI European Group, BV's senior unsecured notes to BB-/RR2 from B/RR3.

The outlook is positive.

Proceeds from the sale will be used to pay down senior secured debt, including Owens-Brockway's 8 7/8% notes due 2009, 7¾% notes due 2011 and 8¾% notes due 2012.

The agency said the upgrade is based on the lower debt projected to be outstanding after the plastics divestiture, improved financial flexibility, Owens-Illinois' focus on core operations improvement and extended debt maturity schedule.

The positive outlook reflects Fitch's expectations for continued improvement in operating performance and credit metrics over the intermediate term as a result of the company's focus on its core glass operations and on improving its credit profile. Given the lower debt levels projected after the plastics divestiture, improved free cash flow generation could lead to a review of the ratings for a possible upgrade.

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