S&P affirms Verallia after issue was cancelled

S&P said it affirmed the B long-term corporate credit rating on Horizon Holdings I, the financial holding company for Verallia.

The agency also said it affirmed the B long-term corporate credit rating on Verallia's finance subsidiary, Verallia Packaging SAS.

The outlook on both companies is stable.

S&P also said it is withdrawing the CCC+ rating and 6 recovery rating on the proposed €500 million payment-in-kind toggle notes that were not issued.

The agency also is withdrawing the B corporate credit rating on Horizon Parent Holdings Sarl, the expected issuer of the proposed payment-in-kind toggle notes.

S&P also said it affirmed the B ratings on the existing €500 million senior secured notes, €250 million senior secured revolving credit facility and €1.375 billion term loan issued by Verallia Packaging. The 3 recovery ratings are unchanged, reflecting 50% to 70% expected default recovery.

The agency also said it affirmed the CCC+ rating on the €225 million senior unsecured notes issued by Horizon Holdings I.

The issue rating is two notches lower than the corporate credit rating on the consolidated group, reflecting an expectation of 0 to 10% expected default recovery.

The affirmations follow news that Verallia cancelled plans to raise an additional €500 million of PIK toggle notes in order to fund a €490 million distribution to shareholders.

This follows the recent senior secured notes tap completed in June 2016, which was used to fund a €230 million distribution, the agency said.

The proposed transaction was viewed as aggressive, S&P explained.

If the transaction was completed, credit metrics for the consolidated group would have materially deteriorated with its debt-to-EBITDA increasing to higher than 6.5x from previous expectations of less than 5.5x, the agency said.

Although the transaction was not completed, S&P said it believes that Verallia's financial sponsor owners, Apollo, demonstrated an appetite for increased leverage that was not previously factor into the ratings.

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