Moody's may cut Berry Plastics, Covalence bond

Moody's Investors Service said it placed the B3 corporate family and probability of default ratings of Berry Plastics Group Inc. on review for possible downgrade.

The other ratings on review include its speculative-grade liquidity rating of SGL-3, senior secured bank credit facility rating of B1, senior secured regular bond/debenture ratings from Caa1 to B1 and senior unsecured bank credit facility of Caa2.

Also on downgrade review includes Covalence Specialty Materials Corp.'s senior subordinated regular bond/debenture rating of Caa2.

The review follows news that Berry entered into a definitive agreement to acquire the Rexam plc for about $360 million. The transaction is expected to close in the third quarter of 2011.

The outlook was changed to 'rating under review' from stable, Moody's added.

The transaction appears to have a minimal impact on Berry's current debt-to-EBITDA ratio of 7.5x, the agency said.

But the acquisition entails integration risk and the impact on Berry's already negative free cash flow cannot yet be determined, Moody's said.

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