Moody's rates Solo Cup loan Ba2, notes B2

Moody's Investors Service said it assigned a Ba2 (LGD2, 13%) rating to the new $200 million asset-based revolving credit facility of Solo Cup Co. and a B2 (LGD3, 43%) rating to its new $300 million senior secured notes due 2013.

The agency affirmed the corporate family and probability-of-default ratings at B3, the $150 million senior secured revolving credit facility due 2010 and $637 million senior secured term loan B due 2011 at B2 (LGD3, 35%), the $323 million senior subordinated notes due 2014 at Caa2 (LGD5, 87%) and the speculative-grade liquidity rating at SGL-2.

The outlook is stable.

The proceeds from the notes and bank financing are expected to be used to repay all amounts outstanding under the company's existing first-lien credit agreement. Moody's believes the transaction is largely credit neutral given the use of proceeds.

The agency said the company's competitive position is still evolving and that the ratings reflect Solo Cup's concentration of sales, the risks inherent in the company's plan to exit certain business and the lack of long-term contracts for a high percentage of business.

The ratings are supported by the company's ongoing performance improvement initiatives, broad product portfolio, long-standing customer relationships and strong liquidity, Moody's said.

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