Rating firm Fitch has assigned a “BB“ rating to Owens-Illinois“ (OI) US$ 4.5 billion senior secured bank credit agreement due 2003. At the same time, the ratings have been lowered on OI“s senior u…
Rating firm Fitch has assigned a “BB“ rating to Owens-Illinois“ (OI) US$ 4.5 billion senior secured bank credit agreement due 2003. At the same time, the ratings have been lowered on OI“s senior unsecured notes to “B+“ from “BB“ and convertible preferred stock to “B-“ from “B+“. The rating action reflects the structural subordination of the bondholders following the completion of the new bank credit agreement, which provides bank lenders with substantial collateral. The rating outlook remains negative. OI“s new US$ 4.5 billion bank credit agreement will consist of a US$ 3 billion revolving credit facility and a US$ 1.5 billion term loan maturing on 31 March 2003. The bank borrowings of the new agreement will be held by certain domestic and foreign subsidiaries (compared to the former agreement where borrowings were held at the holding company level, Owens-Illinois, Inc.) and will be secured by substantially all of the domestic and foreign assets of the company. The bank agreement will be subject to both a maximum consolidated leverage and fixed charge coverage test. As a result of the new bank credit agreement, the senior noteholders, which remain obligations of the holding company, will rank behind bank lenders in order of claims priority on the assets and will be structurally subordinated to the operating cash flows. However, the senior noteholders will receive a silent second lien on the assets granting a priority claim on the assets over other unsecured claimants and will be guaranteed by OI Group, Inc.