OREANDA-NEWS. S&P Global Ratings today lowered its issue-level rating on Printpack Holdings Inc.'s proposed $275 million first-lien senior secured term loan due 2023 to 'BB-' from 'BB' and revised its recovery rating on the loan to '2' from '1' after the company announced that it will be upsizing the loan by $25 million (was $250 million originally). The '2' recovery rating indicates our expectation for substantial (70%-90%; upper half of the range) recovery in a payment default scenario. Printpack intends to use the proceeds from this term loan to add cash to its balance sheet and fund potential acquisitions. All of our other ratings on Printpack Holdings Inc., including our 'B+' corporate credit rating, remain unchanged.

For our complete corporate credit rating rationale, please see our research update on Printpack published May 6, 2016, on RatingsDirect.

RECOVERY ANALYSIS

Key analytical factorsOur simulated default scenario assumes a payment default occurring in 2020 due to a significant economic downturn that affects the demand for packaged consumer products, which is compounded by increased competitive pressure and adverse changes in raw material prices. We estimate that Printpack's EBITDA would need to decline by about 55% from current levels for the company to default, which is unlikely in the next 12-18 months. We assume that Printpack would regain some of its lost volume and improve its margins while in bankruptcy, resulting in $65 million of EBITDA at emergence.

Simulated default assumptionsSimulated year of default: 2020EBITDA at emergence: $65 millionEBITDA multiple: 5.5xSimplified waterfallNet enterprise value (after 5% admin. costs): $340 millionValuation split (obligors/nonobligors): 92%/8%Priority claims: $111 millionValue available to first-lien debt claims (collateral/noncollateral):$219 million/$9 millionSecured first-lien debt claims: $278 million--First-lien recovery expectations: 70%-90% (upper half of the range)Note: All debt amounts include six months of prepetition interest. Collateral value equals asset pledge from obligors after priority claims plus equity pledge from nonobligors after nonobligor debt.