S&P downgrades packaging firm as it parcels up more debt

Standard & Poor's yesterday downgraded paper and packaging firm Rock-Tenn from BBB to BBB- as it has completed its acquisition of containerboard and corrugated packaging producer Smurfit-Stone Container Corp.

The acquisition sees Rock-Tenn take on $4.3 billion of debt financing to finance the merger, repay Smurfit-Stone's outstanding debts, refinance its existing credit facilities, and to provide liquidity of about $1 billion, says S&P.

The stable rating outlook reflects S&P's view that Rock-Tenn's operating performance over the next 12 to 18 months will allow it to modestly repay its debt.