Rock Tenn Co., the container and packaging company with the highest earnings per share in its industry, plans to repay some of its bank loans as it pursues an investment-grade ranking from Moody’s Investors Service.
“Right now we’re focused on paying down debt,” John Stakel, treasurer of the Norcross, Georgia-based company, said in a telephone interview. “In time, we believe that an investment-grade rating will come.”
Moody’s rates the company Ba1, one level below investment grade, and Standard & Poor’s grades it BBB-. High-yield, high-risk debt is ranked below Baa3 by Moody’s and lower than BBB- at S&P.
Rock Tenn may reduce its ratio of debt to earnings before interest, taxes, depreciation and amortization, or Ebitda, to as low as 2 times from its current level of 2.7 times, Stakel said. It would prioritize paying down its first-lien loans, he said.
Rock Tenn had $3.2 billion of total debt as of March 31, including a $947.5 million term loan, $237.1 million on its revolver and a $540 million receivables-backed financing facility, according to a May 3 regulatory filing.
The company’s $350 million of 4.45 percent debentures due March 2019 traded at 105.9 July 9 to yield 3.29 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Rock Tenn reported basic earnings per share before extraordinary items of $7.68 for the 12 months ended March 31, according to data compiled by Bloomberg. It’s reporting third-quarter 2013 earnings July 23.