January 4, 2013 / 10:06 PM / 5 years ago

TEXT-Fitch rates Crown Americas note issuance 'BB+'

Jan 4 - Fitch Ratings has assigned a 'BB+' rating to Crown Americas, LLC's
(CA) $800 million senior notes offering due 2023. The Issuer Default Rating
(IDR) for Crown Holdings, Inc. and its subsidiaries including CA and Crown
European Holdings, SA is 'BB+'. The Rating Outlook is Stable.

The net proceeds of the proposed offering will be mainly used to redeem CA's
outstanding $400 million senior notes due 2017 and prepay $300 million of term
loans. In addition proceeds will be used to pay associated debt redemption
premiums, for payment of related fees and expenses and for general corporate

Support for Crown's ratings is due to the stable cash flows associated with its
contractual commitments, strong market share and cost pass-through despite the
current weakening global economic environment. Crown's geographical
diversification across both mature and emerging markets with a diverse customer
mix results in a balanced revenue stream that should lend greater stability
through economic cycles. Fitch currently expects cash generation to increase due
to past investments in developing market regions.

Increased beverage can volume demand should continue across the majority of
Crown's regions. This should offset volume weakness in European aerosol and
specialty packaging and lower U.S. beverage can demand due to promotional
related activity that remains below expectations. Supply and demand
characteristics should remain firm in Asia with 3.6 billion of capacity
expansions expected in 2013 after adding more than 8 billion in capacity the
previous two years. However, Crown has pulled back on some projects, reflecting
lower demand growth. Past capacity rationalizations and selective-mix
realignments by the can industry in its mature markets also provides pricing

Crown's liquidity is very good and includes its sustainable free cash flow (FCF)
generation, cash and availability under its revolving facility and
securitization programs. At the end of third quarter 2012, Crown had
approximately $1 billion in liquidity primarily from the $720 million of
availability on its $1.2 billion secured credit facilities that will mature in
June 2015. In 2012, Fitch estimates FCF (less minority distributions) should be
approximately $250 million. In 2013, Fitch expects significant growth in FCF to
over $400 million due to several factors. These include lower growth-related
capital going forward, expectations for completed restructuring projects, lower
pension contributions, and ramp-up in productivity related to the organic
capacity expansions. Crown has indicated initial capital spending estimates of
$225 million for 2013 compared to spending expectations of $350 million in 2012
and $401 million in capital spending for 2011.

Crown's near- to medium-term maturities are relatively modest (under $150
million) during the next three years and are primarily related to term loan
amortization. Amortization payments for the approximately $900 million in term
loan facilities during the next three years are 5%, 10% and 15%. The term loans
mature in June 2016. The next significant maturity for Crown's unsecured notes
is Euro 500 million due in 2018. Crown also has significant cushion under its
present covenants.

Crown has considerable ability to move cash through various mechanisms to fund
cash requirements in the U.S. Cash at the end of the third quarter 2012 was $240
million. $215 million of the cash was located outside of the U.S., and more than
half of that cash was held by foreign subsidiaries for which earnings are
considered indefinitely reinvested. At Sept. 30, 2012, Crown has used the
majority of capacity ($190 million) on its $200 million North American
securitization facility that matures in March 2013.

The majority of Crown's excess cash is targeted for share repurchase activity
since Crown is within company leverage targets. Expectations are for Crown to
pace share repurchases to the level of free cash flow. Crown's board of
directors has authorized a stock repurchase program of up to $800 million
through the end of 2014. Crown also pays out approximately $80 to $85 million in
minority distributions but does not have a dividend. Fitch does not expect any
significant minority interest acquisitions given Crown's past focus.

Leverage at the end of the third quarter of 2012 was approximately 3.6 times
(x). Fitch views the top end of the expected leverage range for the rating below
the low to mid 3x range. Credit facility revolver borrowings are higher due to
seasonality. Consequently Fitch expects leverage will moderate going forward
from reduced revolver borrowings, term loan repayments and increased cash flow

Credit risks which Fitch believes are manageable include the increase in revenue
exposure to more volatile, higher-growth emerging markets, exposure to weather
and crop disturbances, macro events outside the control of the company, the
asbestos liability and pension deficit. In late 2011, Crown took steps to
address its growing pension deficit in the U.S. with funding from proceeds of an
add-on $350 million term loan. The GAAP funding levels at the end of 2011 for
the U.S. and non-U.S plans were 78% and 89% on benefit obligations of $1.5
billion and $3.3 billion respectively.


Negative: Future developments that may, individually or collectively, lead to
negative rating include:

--Crown adopting more aggressive financial policies or operating performance
deterioration resulting in material erosion to Crown's credit profile
particularly pushing sustained leverage greater than 3.5x;
--Considerable increase in asbestos liability;
--Significant change in operating trends across the emerging market regions;
--Macro events outside the company's control;
--Significantly reduced free cash flow prospects.

Positive: Crown would need to change its current financial policies. In
particular, this would require the company to commit to a reduced, more
conservative financial leverage policy in the lower 2x range and increased free
cash generation relative to adjusted debt. As a result, Fitch's sensitivities do
not currently anticipate developments with a material likelihood, individually
or collectively, of leading to a rating upgrade.

Additional information is available at 'www.fitchratings.com'. The ratings above
were unsolicited and have been provided by Fitch as a service to investors.

Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012).

Applicable Criteria and Related Research:
Corporate Rating Methodology

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