Jul 12, 2007. /Lesprom Network/. Standard & Poor's Ratings Services said on July 11, 2007 that it affirmed all of its ratings, including its 'B+' corporate credit rating, on Graphic Packaging International Inc. The outlook is negative. The action followed the company's announcement that it had signed a definitive agreement to merge with Altivity Packaging LLC (B+/Stable/--). "The affirmation reflects our expectations that the proposed merger should be modestly positive for the company's business risk profile through both industry rationalization and potential synergies," said Standard & Poor's credit analyst Pamela Rice. The new company, to be named Graphic Packaging Holding Co., will have revenues of about $4.4 billion, and management expects about $90 million of synergies over the next four years. As such, the combined company could produce greater cash flow and accelerate debt reduction beyond what we currently expect for Graphic Packaging. However, pro forma leverage, which we expect to be about the same as for Graphic Packaging currently, will remain very aggressive for the ratings at around 7x. In addition, the new company faces integration risks only a short time after the formation of Altivity. Graphic Packaging had total debt, including debt-like obligations, of $2.1 billion and debt to last-12-month EBITDA of 7x at March 31, 2007. Altivity Packaging had net debt, adjusted for debt-like obligations, of $1.2 billion and debt to 2007 estimated EBITDA of 5.8x. Graphic Packaging has obtained bank commitments to refinance Altivity's $985 million first-lien credit facilities and $330 million second-lien term loan. It also has commitments for a revolving credit facility that it plans to increase. However, at this time, we do not have sufficient details regarding these facilities to determine the impact on existing recovery ratings at Graphic Packaging. Graphic Packaging, based in Marietta, Georgia, manufactures paperboard and folding cartons used in beverage and consumer products packaging, as well as packaging machines that are leased to beverage manufacturers. "We could lower the ratings if Graphic Packaging is unable to reduce its debt sufficiently over the next two years to bring credit measures in line with expectations because of high input costs, a general economic downturn, or difficulties integrating Altivity," Ms. Rice said. "We could revise the outlook to stable if earnings and cash flow are more robust than currently expected because of revenue initiatives, further meaningful cost reductions, or greater-than-expected synergies that allow a more rapid pace of debt reduction." Graphic Packaging Corporation is a leading provider of paperboard and integrated paperboard solutions to beverage and consumer products multinationals. The company is built on operating philosophies that include commitments to innovation, cost reduction, quality and excellent customer service. Graphic Packaging operates 4 paper mills, 24 converting facilities and 2 machinery manufacturing facilities worldwide.