Moody’s cuts Kleopatra, rates Klockner facilities B3

Moody's Investors Service said it assigned a provisional B3 rating to Klockner Pentaplast of America, Inc.'s new €1.58 billion senior secured first-lien term loan B (split between euro and dollar tranches) with a maturity of five years, and at least €150 million revolving credit facility with a maturity of 4.75 years.

Concurrently, the agency downgraded Kleopatra Holdings 2 SCA’s corporate family rating to B3 from B2 and probability of default rating to B3-PD from B2-PD,

Kleopatra is the parent of plastic film packaging manufacturer Klockner Pentaplast.

Upon completion of the transaction, Moody's will withdraw the existing B1 instrument ratings of Klockner Pentaplast GmbH, Klockner Pentaplast of America, Inc. and KP Germany Erste GmbH, as well as the Caa1 senior unsecured notes rating of Klockner Pentaplast of America, Inc.

The outlook on all ratings is stable.

Moody’s said the action reflects Klockner’s announcement that it will issue a new €1.58 billion equivalent term loan B and €385 million Holdco notes to refinance its existing debt, fund the acquisition of Linpac Senior Holdings Ltd. (unrated). Both companies are owned by Strategic Value Partners (SVP).

“Moody's views negatively the intention to fund a shareholder distribution to SVP in the region of €425 million. The shareholder payout is further evidence of an aggressive financial policy, which is not in line with the rating agency's expectation that Klockner will gradually reduce its leverage,” the agency said in a news release.

“SVP acquired a majority equity stake in Klockner in 2012 for c.€200 million as part of a debt restructuring process. The company issued additional debt to fund shareholder distributions in May 2013 and April 2015 totaling €525 million.”

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