Rock Tenn to Reduce Debt in Bid for High-Grade Rank From Moody’s

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.

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