Yahoo Finance 
Moody's may downgrade Ball Corp over Rexam deal
By Mariana Santibanez
NEW YORK, Feb 19 (IFR) - Moody's said on Thursday it may downgrade US can maker Ball Corp (NYSE: BLL - news) amid the company's planned £4.43bn (US$6.85bn) acquisition of British rival Rexam Plc (LSE: REX.L - news) .
Moody's placed Ball's junk Ba1 rating on review for downgrade, citing the company's "aggressive financial policy" among other factors.
"The review for downgrade reflects the significant deterioration in proforma credit metrics, the length of time until the close and the uncertainties inherent in the regulatory process," the rating agency said.
One key risk is that, while Ball expects to close the transaction in the first half of 2016, Rexam remains free to accept other bids.
Moody's estimates the company's proforma leverage at more than five times earnings, while Ball said it would be around 4.5 times after the acquisition.
The company has committed debt financing in place in the shape of a £3.3bn bridge loan from Deutsche Bank (LSE: 0H7D.L - news) , Bank of America Merrill Lynch, Goldman Sachs (NYSE: GS-PB - news) , KeyBank National Association, Royal Bank of Scotland (LSE: RBS.L - news) and Rabobank, TRLPC reported.
Moody's meanwhile assigned a Ba1 rating to Ball's new US$3bn revolver, which will replace an existing US$1bn facility. It also may downgrade Rexam to junk.
2012 BOND PRICES RISE
News of the possible downgrade came as Ball announced a buyback of two outstanding senior notes - an announcement that sent the 2021 bonds higher.
The company said the buyback offer - for its 6.75% 2020s and 5.75% 2021s - was unrelated to the acquisition.
The US$500m 2021s were up 1.375 points to 106.125, a trader said. The issue is callable on November 15 at 102.875, according to Trace, but Ball will pay a premium to buy them now.
One investor estimated Ball would pay 106.25 for them.
The trader said the company's decision was likely triggered by covenants in the bonds, which would prevent Ball from issuing more debt while they remain outstanding.
Ball declined to comment.
The redemption price for the 2020 notes, which also have about US$500m outstanding, is 103.375% plus accrued and unpaid interest - in line with the call price on March 15. (Reporting by Mariana Santibanez; Editing by Natalie Harrison and Marc Carnegie)
