Moody's Rates Crown Holdings' Senior Notes Stable
Following Crown Holdings, Inc.’s (CCK) announcement that its subsidiary, Crown European Holdings S.A., plans to offer €500 million (around $680 million) worth of senior unsecured notes, Moody's Investors Service, the credit rating business of Moody's Corporation (MCO), assigned a Ba1 rating to the proposed senior unsecured notes. The rating depicts a stable outlook.
The senior unsecured notes are scheduled to mature in 2022 subject to market conditions. The proceeds from the issuance will be deployed to retire €500 million senior unsecured notes due 2018. Crown Holdings will use the proceeds to pay fees and expenses related to the offering of New Notes and to pay redemption and tender premiums associated with the repayment of the 2018 Notes. In addition, Crown Holdings has launched a tender offer for the outstanding Notes due 2018. The offer will expire on Jul 22, 2014.
Moody’s added that Crown Holdings's Ba1 corporate family, Ba1-PD probability of default ratings and other ratings remain unchanged. The Ba1 corporate family rating depicts the company's position in an oligopolistic industry, comparatively stable end markets and improved margins. A significant percentage of business under contract with strong raw material cost pass-through provisions, higher margin growth projects in emerging markets and good liquidity also provide support to the rating.
The rating is constrained by the company's sales mix, exposure to international markets and inherent risks in its strategy to grow in emerging markets. Ongoing asbestos liability, exposure to segments which can be affected by weather and crop harvests and to mature industry sectors like carbonated soft drinks also add to the risks. Given that Crown is also mainly concentrated in metal packaging, it carries the risk of substitution with other materials depending on pricing and new technologies.
The ratings outlook is stable. The stable outlook hints that Crown will deploy sufficient free cash flow for debt reduction to improve its credit metrics to a level commensurate with the rating category over the intermediate term.
Crown Holdings reported a 14% year-over-year rise in its first-quarter 2014 adjusted earnings to 57 cents per share, surpassing the Zacks Consensus Estimate of 51 cents.
For the second quarter of 2014, it expects earnings per share between 90 cents and $1.00, excluding any impact from the Mivisa acquisition. Including the impact of Mivisa acquisition and excluding the impact of share repurchases, full-year earnings per share are expected to exceed the previous guidance of $3.15 to $3.35.
Philadelphia-based Crown is a leading supplier of packaging products to consumer marketing companies. The company manufactures aluminum beverage cans, food cans, aerosol cans and other packaging products.
Crown Holdings currently holds a Zacks Rank #2 (Buy). Some other stocks worth considering in the same sector include Graphic Packaging Holding Co. (GPK) and Sonoco Products Co. (SON). These carry the same rank as Crown Holdings.
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