May 11, 2007. /Lesprom Network/. Standard & Poor's Ratings Services said on May 9, 2007 that it placed all of its ratings, including its 'B+' corporate credit rating, on Caraustar Industries Inc. on CreditWatch with negative implications. "The rating action was prompted by very poor first-quarter earnings and negative free cash flow," said Standard & Poor's credit analyst Pamela Rice. "Although we expected pressure from the drastic spike in recycled fiber and lower shipments of gypsum facing paper because of the housing downturn, demand for other products was weaker than we expected." The company has announced several price increases, continues to rationalize its facilities, has implemented numerous cost savings measures, and should spend less on capital this year than in 2006. "However," Ms. Rice said, "the gradual improvement in credit measures this year that the ratings had incorporated is not expected to occur." Caraustar's liquidity fell to $27 million at the end of the first quarter, well below our expectations. Although it's seeking an additional $10 million of availability under the $100 million credit facility, we are concerned that this may not be sufficient to support the current ratings. We will meet with management as soon as possible to discuss liquidity and its plans for refinancing and to review its financial projections to resolve the CreditWatch listing. Caraustar Industries, a recycled packaging company, is one of the world’s largest integrated manufacturers of converted recycled paperboard and is dedicated to providing customers with outstanding value through innovative products and services. Caraustar has developed its leadership position in the industry through diversification and integration from raw materials to finished products. Caraustar serves the four principal recycled boxboard product end-use markets: tubes, cores and composite cans; folding cartons; gypsum facing paper and other specialty paperboard products.