Moody's cuts Owens-Illinois, unit

Moody's Investors Service said it downgraded the ratings for the senior secured notes and unsecured notes at Owens-Brockway Glass Container Inc. and the senior unsecured notes and convertible preferred stock at Owens-Illinois Inc. following Owens-Illinois' announcement that it is in exclusive negotiations to acquire BSN Glasspack SA.

Moody's also affirmed the existing rating for Owens-Brockway's senior secured credit facility and assigned a B1 rating to its proposed incremental term loans. Proceeds from the latter are intended to finance the acquisition.

Moody's lowered the company's $2.1 billion senior secured notes due 2009-2012 to B2 from B1, lowered the $450 million 8.25% senior unsecured notes due 2013 to B3 from B2, lowered the $1.4 billion senior unsecured notes at Owens-Illinois due 2005-2018 to Caa1 from B3, lowered $452.5 million convertible preferred stock at Owens-Illinois to Caa2 from Caa1, affirmed at B1 a $1.9 billion senior secured credit facility, assigned a B1 rating to the proposed incremental term C loans totaling about €1.3 billion, affirmed at B2 the senior implied rating at Owens-Illinois, and lowered to Caa1 from B3 the senior unsecured issuer rating at Owens-Illinois.

The outlook is stable.

Moody's said the ratings reflect weak consolidated credit metrics pro forma for the proposed transactions. Concern remains regarding the susceptibility of margins to rising natural gas and resin costs and to adverse effects of weather on volume in certain geographies.

More positively, the ratings reflect Moody's expectation of somewhat improved consolidated financial performance pro forma for the strategic acquisition with meaningful reduction in consolidated financial leverage throughout the intermediate term, albeit primarily driven by improved earnings rather than permanent debt reduction.

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