Moody’s lowers W/S Packaging

Moody’s Investors Service said it downgraded the corporate family rating of W/S Packaging Group, Inc. to Caa2 from B3 and probability of default rating to Caa3-PD from Caa1-PD.

Moody’s also said it downgraded the ratings on the senior secured credit facilities to Caa1 from B2.

The outlook remains negative.

The downgrades reflect weaker-than-expected operating performance for the company in the first two quarters of fiscal 2016, which prompted an equity cure to avoid a covenant breach, Moody’s said.

The downgrade also considers an expectation that the company’s liquidity will remain weak as the covenant steps down again in March and December of 2016, leaving little headroom for negative variance in operating performance, the agency said.

The agency said it forecasts further pressure on the company’s margins and earnings as new customer wins are taking longer than expected, while base business declined and the company continues to lose volumes due to the discontinuation of a cup product by a key customer.

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