Fitch upgrades Owens-Illinois

Fitch Ratings said it upgraded the issuer default ratings of Owens-Illinois, Inc. and Owens Brockway Glass Container Inc. to BB from B+ and Owens-Illinois' senior unsecured notes to BB- from B-/RR6. The agency also upgraded the senior secured credit facilities of Owens Brockway Glass and OI European Group, BV to BBB- from BB+/RR1 and their senior unsecured notes to BB+ from BB/RR2.

The outlook is stable.

The agency said the upgrade is based on substantially improved operating performance in fiscal 2007 and in the year to date, including an increase in operating cash flow to $625 million in fiscal 2007 from $111 million in fiscal 2006 and an EBITDA margin expansion of 310 basis points from fiscal 2006 to fiscal 2007. The sustained positive trend in operating results has offset the lost revenues and earnings from the divested plastics business sooner than Fitch anticipated.

The ratings are supported by the company's improved cash flow, industry-leading margins, leading market positions, global footprint, technology leadership and long-term customer relationships with large, stable customers, Fitch said.

Ratings concerns remain focused on higher energy and fuel costs, a substantial portion of sales being derived from mature markets with slow volume growth and, to a lesser extent, asbestos liabilities, the agency said.

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