Standard and Poor“s ratings of Anchor Glass Container Corp.“s senior unsecured debentures (B-), subordinated notes (CCC+) and corporate credit (B) are to remain on Credit Watch with negative implica…
Standard and Poor“s ratings of Anchor Glass Container Corp.“s senior unsecured debentures (B-), subordinated notes (CCC+) and corporate credit (B) are to remain on Credit Watch with negative implications. The current ratings, which have been in place since 4 August 1995, affect around US$ 554 million of debt. A newly proposed agreement is to include an amendment of the terms of the senior secured notes, a new US$ 130 million senior secured revolving credit facility, and an equity infusion of up to US$ 126 million over two years by unrated Vitro S.A.. Vitro, which owns 100% of Anchor“s equity, is one of Mexico“s largest publicly traded firms and the dominant manufacturer of glass bottles in Mexico. Once affirmed, ratings will reflect Anchor“s deteriorating operating performance, weak cash flow protection measures, and an increasingly difficult industry environment. Measures will be taken to improve Anchor“s position in the intensely competitive glass-container industry. These include using a significant portion of the equity infused by Vitro for new state-of-the-art glass-forming machinery and furnace rebuilds, which could aid Anchor“s cost position considerably. Efforts will also be made to consolidate certain Anchor operations with Vitro“s glass-container operations in Mexico, potentially resulting in savings. Nonetheless, US glass-container manufacturers have been challenged by the sharp rise in demand for containers made of “PET” plastic resin, which is replacing glass in the soft drink and some other markets because of its light weight and impact resistance. Challenges also increased this year with the consolidation of two of Anchor“s major competitors, as well as Anchor“s loss of significant sales volumes with an important customer, which will only be offset partially by new business relationships. Financial risk will remain high over the next couple of years, with cash flow to adjusted total debt likely to remain weak. As of 30 September 1995, 12-month rolling cash flow to adjusted total debt was about 12%, Standard and Poor“s said. It has also been announced that Anchor has persuaded town officials in Aberdeen, New Jersey, US, to move away from electric utility Jersey Central Power & Light Co. (Morristown, New Jersey) to create its own municipal electric utility, which can reduce the town residents“ electric rates by at least one-third and save Anchor up to US$ 2 million per year in electricity costs. A referendum among town residents will decide whether a new municipal electric utility will be created.