Sealed Air's S&P Rating Raised; Outlook is Positive

Standard & Poor's yesterday raised its corporate credit rating on Sealed Air Corp. to triple-'B' from double-'B'-plus and removed the rating from CreditWatch, where it was placed Aug. 15, 1997. The outlook is positive. At the same time, Standard & Poor's assigned its double-'B' rating to Sealed Air's $1.8 billion convertible preferred stock series A.

The upgrade reflects Sealed Air's improved business position due to its merger with the packaging business of W. R. Grace & Co., and its less aggressive financial policy. The ratings also recognize the firm's ability to generate steady, sizable free cash flow. Sealed Air has a solid above-average business risk profile as a leading flexible protective packaging company with annual sales in excess of $2.5 billion and attractive profitability. The merged entities' operations are complementary and are supported by strong brand name recognition, especially W.R. Grace's Cryovac flexible packaging, which includes multilayer shrink bags and films for food. Meaningful barriers to entry include technological expertise, solid customer relationships and a global infrastructure.

Cross-selling opportunities and synergies should offset risks associated with integration and weak economies. Expectations are that the firm will continue to use its high levels of discretionary cash flow (after changes in working capital, capital expenditures and preferred dividends) to fund growth and reduce debt levels. Although debt to capital of about 40% reflects moderate debt leverage, debt plus preferred stock to total capital is high at about 87%.

Should management successfully integrate operations and realize cost savings while maintaining a moderate financial profile, the ratings may be raised in the intermediate term, Standard & Poor's said.