Moody's rates Pliant notes B2, Caa1

Moody's Investors Service said it assigned first-time ratings to Pliant Corp. following its emergence from Chapter 11 on July 18, including B3 corporate family and probability-of-default ratings, an SGL-3 speculative grade liquidity rating, B2 ratings with loss-given-default assessments of LGD3 (38%) to the company's $288 million senior secured first-lien 11.85% pay-in-kind notes due 2009 and $7.5 million senior secured first-lien 11.35% notes due 2009 and a Caa1 rating with a loss-given-default assessment of LGD5 (77%) to its $250 million senior secured second-lien 11 1/8% notes due 2009.

The outlook is stable.

The agency said the ratings reflect Pliant's substantial leverage and minimal free cash flow subsequent to the recent financial restructuring. Pro forma for the reorganization and after application of Moody's standard adjustments, debt to EBITDA at June 30 was more than 7x and free cash flow was negative. Moody's projected modest improvement by the end of the year with adjusted debt to EBITDA at roughly 7x times and free cash flow at break even.

Strengths in Pliant's competitive profile include annual revenues of $1.1 billion, product diversity reflected in sales of both commodity and value-added films and packaging and formal customer agreements that account for over half of revenues, the agency said.

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