WestRock Co. Assigned #A-2# Short-Term CCR, Outlook $1 Billion Commercial Paper Program Rated #A-2#

Stocks and Financial Services Press Releases Wednesday November 1, 2017 18:14
NEW YORK--1 Nov--S&P Global Ratings

NEW YORK (S&P Global Ratings) Oct. 31, 2017--S&P Global Ratings said today that it had assigned its 'A-2' short-term corporate credit rating to Norcross, Ga.-based WestRock Co. and affirmed all of its ratings on the company. The outlook remains stable.

At the same time, we assigned our 'A-2' short-term rating to the company's new $1 billion commercial paper program. The company will backstop the program through its $2 billion in aggregate revolving credit facilities due 2020 and 2022.

We expect that WestRock will use the commercial paper program for general corporate purposes.

The affirmation reflects our belief that WestRock's business strengths (including its leading market positions, broad and differentiated product offerings, productivity gains, and the synergies from its recent acquisition of Multi Packaging Solutions Ltd.) will allow it to weather the challenges posed by weaker consumer packaging volumes and fluctuating raw material prices.

Following WestRock's $2.28 billion acquisition of print-based specialty packaging company Multi Packaging Solutions Ltd. in June 2017, the company's trailing-12-month adjusted debt-to-EBITDA rose to 3.2x as of June 30, 2017, from 2.7x as of March 31, 2017. We expect WestRock's debt leverage to decline to 2.6x or lower by the middle of the fiscal year ending Sept. 30, 2019, absent any unforeseen transformative acquisitions or other large capital outlays. This level of leverage is comfortably within the 2.00x-3.00x range that we view as appropriate for the current rating and well ahead of the 3.25x level that would prompt a modest downgrade.

As of WestRock's third fiscal quarter ended June 30, 2017, the company had $2.2 billion outstanding under its term loan facilities and $415 million outstanding on its $700 million receivables securitization facility ($571 million borrowing base) due July 22, 2019. WestRock also had drawings on other credit lines, including $51 million outstanding under a $200 million revolving line of credit with Sumitomo Mitsui Banking Corp. due Feb. 12, 2018, and $465 million under a $600 million 364-day European revolving credit facility with Cooperatieve Rabobank U.A. New York Branch due May 14, 2018. The company's $2 billion of revolving commitments ($100 million due July 1, 2020, and $1.9 billion due July 1, 2022) were undrawn. Subsequent to the quarter's end, the company issued $500 million of senior notes with a seven-year maturity and a 3.000% coupon and $500 million of senior notes with a 10-year maturity and a 3.375% coupon. WestRock used the net proceeds from these notes to refinance its existing debt.

For our complete rating rationale on WestRock, please see our last research update, published June 6, 2017, on RatingsDirect.

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