Fitch Affirms Ratings for Crown Holdings and Subs; Revises Outlook to Positive

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings for Crown Holdings, Inc. (Crown), and its subsidiaries Crown Cork & Seal Company, Inc. (CCS), Crown Americas, LLC. (CA), and Crown European Holdings, SA (CEH) as follows:

Crown

--Issuer Default Rating (IDR) at 'BB-'.

CCS

--IDR at 'BB-';

--Senior unsecured notes at 'B+'.

CA

--IDR at 'BB-';

--Senior secured dollar term facility at 'BBB-';

--Senior secured dollar revolving facility at 'BBB-';

--Senior unsecured notes at 'BB-'.

CEH

--IDR at 'BB-';

--Senior secured euro term facility at 'BBB-';

--Senior secured euro revolving facility at 'BBB-';

--Senior secured euro 1st priority notes at 'BBB-' .

The Rating Outlook has been revised to Positive from Stable.

The ratings affirmation of Crown reflects the stability in the company's cash flows despite a challenging economic environment that pressured volumes in certain segments although cost containment measures, including restructuring and price increases, have led to continued profitability improvements. Fitch also believes the geographical diversification across both mature and emerging markets with a diverse customer mix results in a more balanced revenue stream that lends greater stability through economic cycles. In addition, Crown's credit profile has strengthened through debt repayment, an improved maturity profile and increased liquidity that has resulted in leverage and interest coverage improvements. Fitch further expects Crown's operational prospects and credit profile to strengthen during 2010. As a result, the Outlook has been revised to Positive. Adjusted leverage (including accounts receivable securitization and lease expense) at the end of 2009 was 3.3 times (x) compared with 3.7x at the end of 2008.

Based upon its strengths, Fitch believes Crown is well-positioned to sustain operating free cash flow levels. Free cash flow for 2009 was $489 million (including minority interest distributions) and incorporated a material positive component from working capital. Other cash obligations included pension contributions of $74 million and asbestos payments of $26 million that should continue at similar levels for 2010. Crown also paid $87 million in minority interests distributions associated with the company's joint venture beverage can operations that likely should be of comparable nature in 2010. Fitch believes that it's reasonable that underlying volume demand should continue to recover in 2010 and result in growth compared to 2009 as the company additionally benefits from new capacity coming on line thus driving revenue growth. Consequently, with expectations for stable profitability, Fitch anticipates at least modest growth in EBITDA for 2010.

Expectations are for the company to use a significant portion of its free cash flow in 2010 for further debt reduction with the company likely focusing on its near-term maturities (2011 and 2013) or potentially reducing outstandings under its accounts receivable securitization program. With the company nearing its net leverage goal of 2.0x or less, Fitch expects the company will consider using some excess cash for shareholder based initiatives like share repurchases. Crown has a $500 million share repurchase program that expires at the end of 2010 with $467 million of availability. With the improvement in its credit profile and considerable free cash generation, Crown certainly has capacity to consider acquisitions, but Fitch believes any acquisition would likely be of smaller size as opportunities for a larger acquisition appear limited at this time. By the end of 2010, Fitch expects adjusted leverage in the range of 2.7-2.9x.

Crown's liquidity is good, in excess of $1 billion, with $459 million of cash and $758 million under its revolving credit facility less $84 million of outstanding letters of credit and $113 million drawn on the revolver. In addition, the company has capacity under its securitization program, which totaled $232 million at the end of 2009. Crown has a committed $225 million North American and Euro120 million European securitization facilities, which mature in March 2010 and June 2010, respectively. Crown's secured revolving credit facilities mature in May 2011. Fitch expects Crown to address the maturities with its accounts receivable program and the credit facility in the next couple of quarters. As a result of past deleveraging and cash flow growth, Crown currently has a considerable cushion under its covenants, and Fitch believes the company should be able to maintain ample cushion even though the covenants tightened at the end of 2009.

Current maturities are relatively modest during the next two years. During 2009, Crown improved its maturity profile by reducing its 2011 maturity in excess of $400 million, its 2013 maturity by $300 million and by extending $400 million of debt maturities through 2017. As a result, Crown now has $229 million outstanding on its first lien secured notes due in September 2011. Crown also has $354 million U.S. secured term loan and $388 million European secured term loan due November 2012. The term loans are prepayable without penalty although the company has chosen not to reduce the amount outstanding in the past due to its attractive interest rate and has paid down other higher cost debt. Crown could also consider a Eurobond issuance to extend maturities further and increase its mix of foreign debt given the majority of the company's revenues is outside of the U.S.

These rating actions reflect the application of Fitch's current criteria which are available at 'www.fitchratings.com' and specifically include the following reports:

--'Corporate Rating Methodology' (Nov. 24, 2009);

--'Liquidity Considerations for Corporate Issuers' (June 12, 2007).

Additional information is available at 'www.fitchratings.com'. The issuer did not participate in the rating process other than through the medium of its public disclosure.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.