TEXT - S&P: BWAY rtgs placed on watch neg

Mon Dec 3, 2012 6:00pm EST

Overview
     -- BWAY today announced that it has entered into a definitive agreement 
to acquire Ropak Packaging (Ropak) from the LINPAC Group in a transaction 
valued at approximately $265 million.
     -- Ropak is a North American producer of rigid, plastic shipping 
containers serving the consumer goods, food processing, construction, dairy, 
petroleum and other industries.
     -- The transaction is subject to certain closing conditions, including 
receipt of regulatory approvals, and the company expects the closing to occur 
by year-end 2012 or January 2013.
     -- We are placing our ratings on BWAY, including the 'B' corporate credit 
rating, on CreditWatch with negative implications. This reflects our 
expectation that the acquisition will have a negative impact on the company's 
financial risk profile, which could lead to a downgrade.

Rating Action
On Dec. 3, 2012, Standard & Poor's Ratings Services placed its ratings, 
including its 'B' corporate credit rating, on BWAY Parent Co. Inc., BWAY 
Holding Co., and all rated subsidiaries (BWAY) on CreditWatch with negative 
implications.

Rationale
The CreditWatch placement reflects the likelihood that BWAY's financial risk 
profile will weaken beyond expectations at the current rating, given the 
expectation that the company will fund the Ropak acquisition with debt. The 
transaction will be financed by increasing the size of the company's existing 
term B loan. The CreditWatch listing will also address the potential for the 
ratings on the existing debt to be lowered as a result of the proposed new 
debt financing. 

Pro forma for Platinum Equity's recent acquisition of BWAY in November 2012, 
total adjusted debt-to-EBITDA is about 6.8x and funds from operations 
(FFO)-to-total adjusted debt is about 11.5%, as of BWAY's fiscal year-end on 
Sept. 30, 2012. We expect the company's FFO-to-total adjusted debt to be at 
the low end of the 10% to 15% range expected for the current rating. 
BWAY, with annual sales of about $1.2 billion, mainly produces plastic 
containers and general-line metal containers for packaging paints, solvents, 
and household products in the U.S. market. It's also North America's 
third-largest producer of aerosol cans, which represent about 12% of the 
company's sales. The rating on BWAY reflects our expectation of highly 
leveraged financial profile, which is reflected in the total adjusted 
debt-to-EBITDA of about 6.8x as of Sept. 30, 2012. It also reflects the 
company's very aggressive financial policies, exposure to volatile resin 
costs, and key industry risks, such as weak demand in the housing and 
industrial end markets. The company's good profitability and cash flow, market 
share gains from recent acquisitions, benefits from plant rationalization, 
favorably structured contracts, and cost-reduction efforts partly offset these 
weaknesses. We characterize BWAY's business risk profile as "fair" and its 
financial risk profile as "highly leveraged".

CreditWatch
We placed the ratings on CreditWatch with negative implications. We will 
monitor developments relating to this transaction and will resolve the 
CreditWatch listing once further details related to the transaction become 
available. We intend to meet with management to discuss a variety of topics 
related to the transaction, such as integration risks, synergies, the pro 
forma capital structure, and management's strategic objectives and financial 
policies. The CreditWatch placement indicates the heightened risk that we will 
likely lower the ratings following our review of the transaction and 
implications for credit quality.

Related Criteria And Research
     -- U.S. Packaging Companies' Debt Is Rising, But Refinancing Risk Is 
Still Manageable, June 26, 2012 
     -- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012 
     -- Key Credit Factors: Methodology And Assumptions On Risks In The 
Packaging Industry, Dec. 4, 2008
 
Ratings List
Ratings Placed On CreditWatch Negative

BWAY Parent Co. Inc.
BWAY Holding Co.
BWAY Corp.
                                        To                 From
 Corporate Credit Rating                B/Watch Neg/--     B/Stable/--

BWAY Parent Co. Inc.
 Senior Unsecured                       CCC+/Watch Neg     CCC+
  Recovery rating                       6                  6

BWAY Holding Co.
 Senior Secured                         B/Watch Neg        B
  Recovery rating                       3                  3
 Senior Unsecured                       CCC+/Watch Neg     CCC+
  Recovery rating                       6                  6
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