S&P keeps Packaging Corp. on positive watch

Standard & Poor's said Packaging Corp. of America remains on CreditWatch positive including its senior secured bank debt at BBB and subordinated debt at BB+.

S&P's comments come after Packaging Corp. announced a $550 million senior unsecured note offering.

The ratings were placed on CreditWatch on June 24 when Packaging Corp. announced a tender offer for its $550 million 9 5/8% senior subordinated notes due 2009.

If the tender offer is completed successfully, and the new notes are issued at a substantially lower coupon than the existing notes as is expected, S&P said it will raise all of its ratings on the company by one notch. The outlook will be stable.

These rating actions would reflect, to varying degrees, the strengthening of the company's financial profile that has occurred and is expected to continue, S&P said. As one of the lowest cost producers in the industry, even at the bottom of the cycle PCA generates solid cash flows, which are expected to be used to repurchase shares, finance bolt-on acquisitions, and continue modestly reducing debt.

Moody's rates Packaging Corp. notes, loan Ba1

Moody's Investors Service assigned a Ba1 rating to Packaging Corp. of America's planned $550 million note issue and $150 million in new bank facilities and confirmed its existing ratings including its senior secured bank debt at Baa3 and senior subordinated debt at Ba2, the latter two ratings to be withdrawn.

Proceeds from the bond offering and bank loans will be used to refinance most of Packaging Corp.'s existing debt.

Moody's said the confirmation reflects Packaging Corp.'s continued progress in debt reduction, solid trend of improving debt protection measurements and its demonstrated ability to maintain relatively stable volumes even during periods of weak industry-wide demand.

The ratings continue to reflect, however, Packaging Corp.'s concentration in a single business (containerboard and corrugated packaging) and the associated volatility in its earnings and cash generation.

The ratings are also constrained by the significant 42% ownership position of Madison Dearborn Partners.

The anticipated reduction in interest costs from the planned refinancing will support continued strengthening of Packaging Corp.'s credit metrics in the future. The refinancing will provide Packaging Corp. with solid financial liquidity and minimal near-term refinancing requirements.

S&P says Iron Mountain unchanged

Standard & Poor's said Iron Mountain Inc.'s ratings are unchanged including its corporate credit at BB- with a stable outlook following the company's agreement to acquire Hays plc's information management services business for £200 million in cash.

The acquisition will strengthen Iron Mountain's coverage of the record management business in the U.K., the Netherlands and Germany, and add new markets in Belgium and Norway. Hays IMS generated about £88 million in revenue and had an EBITDA margin of 21.7% for the 12 months ended June 30, 2003.

The company's small size and the reasonable purchase multiple will have a modest effect on Iron Mountain's credit measures, S&P said.

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