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TEXT-S&P ups Nordenia to 'BBB-'; outlook stable

(The following statement was released by the rating agency)

Oct 02 - Overview

-- Paper and packaging producer Mondi Group has announced that it has completed the acquisition of Germany-based flexible film and packaging manufacturer Nordenia International AG (Nordenia).

-- Applying our corporate criteria on parent-subsidiary links, we are equalizing our ratings on Nordenia with those on Mondi Group.

-- We are therefore raising our long-term corporate credit rating on Nordenia to 'BBB-' from 'B+' and our issue rating on Nordenia's senior unsecured notes to 'BBB-' from 'B'. At the same time, we removed the ratings from CreditWatch positive.

-- The stable outlook on Nordenia mirrors that on Mondi Group. Rating Action

On Oct. 2, 2012, Standard & Poor's Ratings Services raised to 'BBB-' from 'B+' its long-term corporate credit rating on Germany-based flexible film and packaging manufacturer Nordenia International AG (Nordenia). Additionally, we raised our issue rating on Nordenia's EUR280 million senior unsecured second-priority notes to 'BBB-' from 'B'.

At the same time, we removed the ratings from CreditWatch, where they were placed with positive implications on July 11, 2012. The outlook is stable.

We have also withdrawn our recovery rating on the notes, as we do not apply recovery ratings to investment-grade issues.

Rationale

The upgrade follows the announcement by paper and packaging producer Mondi Group (BBB-/Stable/--) that it has completed the acquisition of Nordenia. Mondi Group now owns almost 100% of Nordenia. Nordenia was previously majority-controlled by Los Angeles-based investment management company Oaktree Capital Management L.P. (A-/Stable/A-2).

Applying our corporate criteria on parent-subsidiary links, we have equalized our long-term corporate credit rating on Nordenia with that on Mondi Group. We see Nordenia as a core subsidiary of Mondi Group that is fully integrated into Mondi Group's operations, strategy, and management, and we understand that Nordenia will be renamed "Mondi Consumer Packaging International AG."

Nordenia is also integrated into its parent's liquidity, financing, and risk management policies. Mondi Group has not formally guaranteed the senior unsecured second-priority notes, but Nordenia will now count as a material subsidiary of Mondi Group under the cross-default clauses in Mondi Group's principal debt facilities.

Our rating on Nordenia also reflects our assessment of Nordenia's business risk profile as "fair" and its financial risk profile as "aggressive."

Liquidity

We assess Nordenia's liquidity as "adequate" under our criteria, in line with that of Mondi Group.

Nordenia's senior unsecured second-priority EUR280 million notes are subject to change-of-control provisions that were triggered as a result of the acquisition, requiring an offer to repurchase the notes (at 101% of their aggregate principal amount) to be made within 30 days. In the unlikely event of noteholders accepting such an offer, Mondi Group has sufficient liquidity from its recent EUR500 million notes issue to purchase the EUR280 million notes.

Outlook The stable outlook on Nordenia mirrors that on Mondi Group.

It also factors in our assumption that Nordenia will remain a key operating unit of Mondi Group. Any rating action we might take on Mondi Group, including an outlook revision, would lead to a simultaneous and identical change on the ratings and outlook on Nordenia. We might also consider a negative rating action on Nordenia if its core position in Mondi Group weakens.

Related Criteria And Research

All articles listed below are available on RatingsDirect on the Global Credit Portal, unless otherwise stated.

-- Corporate Criteria--Parent/Subsidiary Links; General Principles; Subsidiaries/Joint Ventures/Nonrecourse Projects; Finance Subsidiaries; Rating Link to Parent, Oct. 28, 2004

Ratings List Upgraded; CreditWatch/Outlook Action To From Nordenia International AG Corporate Credit Rating BBB-/Stable/-- B+/Watch Pos/-- Senior Unsecured Debt BBB- B/Watch Pos Recovery Rating NR 5 NR--Not rated. ((Bangalore Ratings Team, Hotline: +91 80 4135 5898, Bhanu.priya@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: Bhanu.Priya.reuters.com@reuters.net))