Moody's places Boise Paper's ratings under review for possible upgrade on PCA acquisition

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Moody's places Boise Paper's ratings under review for possible upgrade on PCA acquisition

September 17, 2013 - 07:24

TORONTO, Sept. 16, 2013 (Press Release) -Moody's Investors Service placed the Ba2 corporate family rating (CFR), Ba2-PD probability of default rating (PDR), Ba3 senior unsecured note rating and Baa3 senior secured bank credit facility rating of Boise Paper Holdings, L.L.C. (Boise) under review for possible upgrade. The review has been precipitated by Boise Inc's announcement that it has signed a definitive agreement to be acquired by Packaging Corporation of America's (PCA) (Baa3). PCA is the fourth largest containerboard producer in North America.

On Review for Possible Upgrade:

..Issuer: Boise Paper Holdings, L.L.C.

.... Probability of Default Rating, Placed on Review for Upgrade, currently Ba2-PD

.... Corporate Family Rating, Placed on Review for Upgrade, currently Ba2

....Senior Secured Bank Credit Facility Nov 4, 2016, Placed on Review for Upgrade, currently Baa3

....Senior Secured Bank Credit Facility Nov 4, 2016, Placed on Review for Upgrade, currently Baa3

....Senior Unsecured Regular Bond/Debenture Apr 1, 2020, Placed on Review for Upgrade, currently Ba3

....Senior Unsecured Regular Bond/Debenture Nov 1, 2017, Placed on Review for Upgrade, currently Ba3

Outlook Actions:

..Issuer: Boise Paper Holdings, L.L.C.

....Outlook, Changed To Rating Under Review From Stable

RATINGS RATIONALE

PCA's acquisition of Boise Inc will likely result in the withdrawal of all Moody's ratings on wholly owned subsidiary Boise upon the closing of the transaction. Moody's review will focus on the amount (if any)of debt remaining at Boise; structural and implicit credit support from PCA; post-closing credit metrics; the size and pace of cost synergies that can be realized; and Boise's ability to maintain adequate liquidity.

Boise Inc and PCA today announced that they have entered into a definitive agreement under which PCA will acquire all of the outstanding common shares of Boise for $12.55 per share in cash, for an aggregate transaction value of almost $2 billion, inclusive of $714 million of net debt of Boise. As contemplated by PCA, all of the debt of Boise Paper will be refinanced. PCA has committed bridge financing in place to acquire Boise Inc's equity and refinance Boise's outstanding debt. The acquisition is expected to close before the end of the year and is subject to regulatory clearances and other customary closing conditions.

The principal methodology used in this rating was the Global Paper and Forest Products Industry Methodology published in September 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Boise Paper Holdings, L.L.C., an indirect wholly owned subsidiary of Boise Inc, headquartered in Boise, Idaho, is the third-largest North American producer in uncoated free sheet paper and is a producer of linerboard, corrugated containers, and specialty paper products.