Fitch revises Smurfit Kappa to negative

Fitch Ratings said it revised Smurfit Kappa Group plc's (SKG) outlook to negative from stable and affirmed its long-term foreign currency issuer default rating and the senior unsecured ratings of Smurfit Kappa Acquisitions and Smurfit Kappa Treasury Funding at BB+.

The actions follow SKG's acquisition of two Brazilian paper-based packaging businesses, Industria de Embalagens Santana (INPA) and Paema Embalagens (Paema), for a total consideration of €186 million.

Fitch said the outlook revision reflects SKG's faster-than-expected ramp-up of acquisitions and shareholder returns at a time when its financial profile has not yet improved to a level that is commensurate with its BB+ rating.

Priced at multiples of 6.3 times EBITDA (including synergies) and 8.0 times EBITDA (excluding synergies), INPA and Paema will result in total acquisitions of more than €350 million in 2015 according to Fitch's estimates, well in excess of around €185 million Fitch-calculated (post dividends) free cash flow generated in 2014.

The agency forecasts pro-forma funds from operations adjusted net leverage of nearly 3.5 times at end-2015 reducing to around 3.25 times over the next 12 to 18 months. This assumes increasing capex and shareholder returns and a slower pace of acquisitions than in 2015.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.