Moody's downgrades Bemis' senior unsecured notes to Baa2 from Baa1, citing lack of improvement in credit metrics, company's decline in volumes due to soft economy; outlook negative

NEW YORK , September 20, 2012 (press release) – Moody's Investors Service ("Moody's") downgraded the senior unsecured rating of Bemis Company Inc ("Bemis") to Baa2 from Baa1 and revised the ratings outlook to stable from negative. Moody's also affirmed the P-2 short-term rating. Additional instrument ratings are detailed below.

Moody's took the following rating actions for Bemis Inc.:

Downgraded senior unsecured rating to Baa2 from Baa1

Downgraded $400 million 5.650% Notes due 08/01/2014, Baa2 from Baa1

Downgraded $400 million 6.800% Notes due 08/01/2019, Baa2 from Baa1

Downgraded $400 million 4.5% Notes due 10/15/2021, Baa2 from Baa1

Affirmed P-2 short-term rating

Revised the ratings outlook to stable from negative


The downgrade of the senior unsecured rating to Baa2 from Baa1 reflects the lack of improvement in credit metrics to the designated rating triggers outlined in the press release dated September 27, 2011. Bemis has been negatively impacted by a decline in volumes caused by a soft economy, the withdrawal from certain low margin business and competition. Although the company has undertaken two restructurings to better align costs with revenues, Moody's believes that Bemis is unlikely to improve credit metrics to a level consistent with the rating category over the intermediate term. Bemis is likely to continue to be negatively impacted by sluggish economic conditions, lower-margin legacy contracts from the Alcan acquisition and, potentially, food price inflation. Additionally, the company's restructuring plan entails some execution risk. While credit metrics are expected to improve over the intermediate term due to the restructuring plan, Moody's believes they are unlikely to reach a level commensurate with the rating category over the horizon. Additionally, the current cushion under the existing covenants is a little less than expected for the P2 commercial paper rating, but management has pledged to improve the cushion and Moody's expects an improvement over the rating horizon.

The rating outlook is stable. The stable outlook reflects an expectation that Bemis will execute on its cost cutting initiatives and new product rollout and maintain credit metrics within the rating category.

The ratings could be upgraded if Bemis sustainably improves credit metrics within the context of a stable operating and competitive environment and maintains adequate liquidity and a balanced financial policy. Specifically, the ratings could be upgraded if free cash flow to debt rises above 16.0%, the EBIT margin rises to the high teens, debt to EBITDA declines below 2.4 times, and EBIT interest coverage rise above 5.5 times.

The ratings could be downgraded if there is a deterioration in credit metrics, the competitive and operating environment and/or liquidity. Specifically, the ratings could be downgraded if debt to EBITDA remains above 2.7 times, EBIT to interest expense declines to below 4.5 times, and free cash flow to debt remains below 11.0%.

The principal methodology used in rating Bemis was the Global Packaging Manufacturers: Metal, Glass, and Plastic Containers Industry Methodology published in June 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on for a copy of these methodologies.


The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website for further information.

Please see for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.