Silgan Downgraded by Moody's - Analyst Blog

Silgan Holdings Inc. (SLGN) has been recently downgraded to Stable from a positive outlook by Moody's Investors Service.

It is worthy of note that the company has been downgraded when it was planning to buy Graham Packaging Company Inc. (GRM) in a cash-and-stock deal worth $1.28 billion.

According to Moody's, it provided a stable outlook contemplating the risks involved in the acquisition and integration of Graham; Silgan's attempts to pay down its debt using free cash flows, thus abstaining from further significant acquisitions and trying to preserve liquidity.

Moody's has assigned a "Ba2" corporate family and probability of default ratings along with a "Ba1" rating to a $2.3 billion term loan, a new $4 billion credit facility and other debt.

Sligan recently reported its fiscal first quarter results increasing its long-term debt to $1443 million as of March 31, 2011 from $863 million as of March 31, 2010. As a result, Sligan's debt-to-capitalization ratio further deteriorated to 71.1% from 62% as of December 31, 2010 and 54% as of December 31, 2009.

Silgan is a leading manufacturer of consumer goods packaging products operating 66 manufacturing facilities in North and South America, Europe and Asia. In North America, Silgan is the largest supplier of metal containers for food products and a leading supplier of plastic containers for personal care products.

A leader in supplying metal, composite and plastic vacuum closures for food and beverage products worldwide, Sligan competes with the likes of Ball Corporation (BLL) and Crown Holdings Inc. (CCK). We currently have a Zacks #2 Rank (short-term Buy recommendation) on the stock.