Ranking Motion: Moody’s assigns Ba2 to Berry’s new 1st lien notes; Ba3 CFR unchanged; outlook secure
International Credit score Analysis – 23 Dec 2020
New York, December 23, 2020 — Moody’s Buyers Service (“Moody’s”) assigned a Ba2 score to Berry International Inc.’s (an entirely owned subsidiary of Berry International Group Inc. (“Berry”)) $750 million senior secured first lien notes due 2026. The Ba3 Company Household Ranking (CFR), Ba3-PD Likelihood of Default Ranking (PDR), and SGL-2 Speculative Grade Liquidity Ranking (SGL) underneath Berry International Group Inc. are unchanged. The outlook stays secure. The proceeds from the brand new notes have been used to repay the senior secured first lien time period loans due 2022 at par and pay charges and bills. Moody’s considers the transaction credit score impartial.
The Ba2 scores on the primary lien senior secured time period loans and notes, one notch above the Ba3 CFR, mirror the devices’ subordination to the asset based mostly revolver for probably the most liquid belongings (accounts receivable and stock) and the advantage of the loss absorption offered by a substantial quantity of second lien debt. The Ba3 CFR displays an expectation of continued excessive leverage by 2021 ensuing from the debt financed acquisition of RPC Group Plc (RPC) in July 2019.
..Issuer: Berry International Inc.
….Senior Secured 1st Lien Notes, Assigned Ba2 (LGD3)
The scores are topic to the receipt and overview of the ultimate documentation.
Moody’s expects Berry to enhance leverage to 4.7 instances by year-end 2021 pushed primarily by debt discount as the corporate continues to make use of free money circulation to pay down debt. Strengths in Berry’s credit score profile embrace its appreciable scale (income), a focus of gross sales in comparatively secure finish markets (meals and healthcare), and powerful free money era. Berry is the biggest rated packaging producer by income and has 75% of its buyer enterprise underneath long-term contracts with value pass-through provisions (raises buyer switching prices and protects towards will increase in risky uncooked materials prices).
Weaknesses in Berry’s credit score profile embrace excessive leverage, some publicity to extra cyclical finish markets and prolonged lags in contractual value pass-through mechanisms with clients (leaving the corporate uncovered to adjustments in volumes earlier than will increase in uncooked materials costs may be handed by). Berry operates within the fragmented and aggressive packaging business which has many non-public, unrated rivals and powerful worth competitors.
The secure outlook displays administration’s pledge to direct all free money circulation to debt discount till metrics enhance to pre-acquisition ranges.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The scores might be upgraded if the corporate sustainably improves credit score metrics throughout the context of a secure aggressive surroundings whereas sustaining good liquidity. Particularly, the scores might be upgraded if funds from operations to debt is above 15.5%, debt to EBITDA is beneath 4.25 instances, and EBITDA to curiosity expense is above 5.25 instances.
The score might be downgraded if Berry fails to enhance credit score metrics or there’s any deterioration in liquidity or the aggressive surroundings. Extra debt financed acquisitions or extreme acquisitions (no matter financing) may additionally immediate a downgrade. Particularly, the scores might be downgraded if funds from operations to debt is beneath 13%, debt to EBITDA is above 4.8 instances, or EBITDA to curiosity expense is beneath 4.25 instances.
Primarily based in Evansville, Indiana, Berry International Group Inc. is a producer of each inflexible and versatile plastic packaging for meals, beverage, well being care, private care, and industrial finish markets. Berry generates roughly 51% of gross sales in North American, 40% in EMEA, 5% in Asia Pacific, and 4% in the remainder of the world. Web gross sales for the twelve months ended September 30, 2020 totaled roughly $11.7 billion.
The principal methodology utilized in these scores was Packaging Producers: Metallic, Glass and Plastic Containers Methodology printed in September 2020 and obtainable at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1236221. Alternatively, please see the Ranking Methodologies web page on www.moodys.com for a replica of this technique.
For additional specification of Moody’s key score assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure kind. Moody’s Ranking Symbols and Definitions may be discovered at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For scores issued on a program, sequence, class/class of debt or safety this announcement supplies sure regulatory disclosures in relation to every score of a subsequently issued bond or notice of the identical sequence, class/class of debt, safety or pursuant to a program for which the scores are derived solely from present scores in accordance with Moody’s score practices. For scores issued on a help supplier, this announcement supplies sure regulatory disclosures in relation to the credit standing motion on the help supplier and in relation to every explicit credit standing motion for securities that derive their credit score scores from the help supplier’s credit standing. For provisional scores, this announcement supplies sure regulatory disclosures in relation to the provisional score assigned, and in relation to a definitive score which may be assigned subsequent to the ultimate issuance of the debt, in every case the place the transaction construction and phrases haven’t modified previous to the task of the definitive score in a fashion that may have affected the score. For additional data please see the scores tab on the issuer/entity web page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit score help from the first entity(ies) of this credit standing motion, and whose scores might change because of this credit standing motion, the related regulatory disclosures will probably be these of the guarantor entity. Exceptions to this strategy exist for the next disclosures, if relevant to jurisdiction: Ancillary Providers, Disclosure to rated entity, Disclosure from rated entity.
The scores have been disclosed to the rated entity or its designated agent(s) and issued with no modification ensuing from that disclosure.
These scores are unsolicited.
a.With Rated Entity or Associated Third Get together Participation: YES
b.With Entry to Inside Paperwork: YES
c.With Entry to Administration: YES
For extra data, please seek advice from Moody’s Coverage for Designating and Assigning Unsolicited Credit score Rankings obtainable on its web site www.moodys.com.
Regulatory disclosures contained on this press launch apply to the credit standing and, if relevant, the associated score outlook or score overview.
Moody’s basic ideas for assessing environmental, social and governance (ESG) dangers in our credit score evaluation may be discovered at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The International Scale Credit score Ranking on this Credit score Ranking Announcement was issued by one in every of Moody’s associates outdoors the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Most important 60322, Germany, in accordance with Artwork.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit score Ranking Companies. Additional data on the EU endorsement standing and on the Moody’s workplace that issued the credit standing is on the market on www.moodys.com.
Please see www.moodys.com for any updates on adjustments to the lead score analyst and to the Moody’s authorized entity that has issued the score.
Please see the scores tab on the issuer/entity web page on www.moodys.com for extra regulatory disclosures for every credit standing.
Edward Schmidt, CFA Vice President - Senior Analyst Company Finance Group Moody's Buyers Service, Inc. 250 Greenwich Avenue New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Shopper Service: 1 212 553 1653 Dean Diaz Affiliate Managing Director Company Finance Group JOURNALISTS: 1 212 553 0376 Shopper Service: 1 212 553 1653 Releasing Workplace: Moody's Buyers Service, Inc. 250 Greenwich Avenue New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Shopper Service: 1 212 553 1653
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