S&P gives Reynolds notes B+, CCC+

S&P said it revised its outlook on Reynolds Group Holdings Ltd., Beverage Packaging Holdings (Luxembourg) I SA, Beverage Packaging Holdings (Luxembourg) II SA and Pactiv Corp. to positive from stable and affirmed its B corporate credit rating on the company.

At the same time, the agency assigned Reynolds Group Issuer Inc., Reynolds Group Issuer LLC and Reynolds Group Issuer (Luxembourg) SA's proposed $2.1 billion senior secured notes a B+ issue rating with a recovery rating of 2, indicating an expectation of substantial (70%-90%) recovery for lenders in the event of a payment default. Due to the increase in secured debt on a pro forma basis, the implied recovery for the senior secured note is now in the lower half of the 70%-90% range, compared with the higher half previously.

In addition, S&P assigned Reynolds Group Issuer Inc., Reynolds Group Issuer LLC, and Reynolds Group Issuer (Luxembourg)'s proposed $800 million senior unsecured notes a CCC+ issue rating with a recovery rating of 6, indicating an expectation of negligible (0%-10%) recovery in the event of a default.

"The outlook revision reflects the prospects for a sustainable reduction in Reynolds' very high leverage," S&P credit analyst Steven Mcdonald said in a news release.

This announced issuance will raise about $3 billion, which the company intends to use, along with roughly $879 million in cash, to redeem roughly $3.8 billion of existing debt. The transaction will reduce Reynolds' debt levels and future interest expense because of the lower coupon rates.

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