London, 08 October 2012 -- Moody's Investors Service has today assigned a first-time corporate family rating ('CFR') and probability of default rating ('PDR') of B2 to Albéa Beauty Holdings S.A. ("Albéa Beauty" or "the group"), the holding company of Albéa Group ("Albéa"). Albéa is a market leader in the design, manufacture and sale of plastic packaging products for the beauty and cosmetics industry.

Concurrently, the rating agency has assigned a provisional (P)B2 rating to Albéa Beauty's proposed issuance of $650 million equivalent of senior secured notes due 2019. The outlook on all ratings is stable.

Albéa Beauty is raising the proposed bond to fund Albéa's acquisition of Rexam PC. On September 20, 2012, Albéa signed an equity purchase agreement with Rexam Plc (Baa3 stable) to acquire its Worldwide Cosmetics Business. Albéa will retain the cosmetics business ("Rexam PC"), whilst the smaller and operationally separate Home & Personal Care business of Rexam Plc's personal care division will be managed and financed separately by an affiliate of Sun Capital. Albéa expects the acquisition to close by early 2013 subject to regulatory approvals.

Moody's issues provisional ratings in advance of the final sale of debt instruments and these ratings reflect the rating agency's preliminary credit opinion regarding the transaction only. Upon a conclusive review of the final documentation, Moody's will endeavour to assign a definitive rating to the debt. A definitive rating may differ from a provisional rating.

RATINGS RATIONALE

Moody's B2 CFR for the group reflects : (1) its exposure to the growing yet cyclical and competitive beauty & personal care market; (2) weakness in recent operating performance trends; (3) potential challenges in terms of the management of input costs associated with the acquisition of Rexam PC, albeit Albéa has a good track record in managing its input costs well on a standalone basis; (4) significant integration risks associated with the acquisition and potentially longer-than-envisaged delays in the combined entity realising synergies and improvements to combined EBITDA. Moreover, the rating further reflects Moody's expectation that (1) the group would exhibit significant leverage at the closing of the transaction and generate negative free cash flow in the near term; and (2) the combined entity would exhibit a weaker EBITDA margin compared with that of some peers.

However, more positively, the rating also takes into account Albéa's longstanding relationships with blue-chip customers, which mitigates its customer concentration risk. In addition, it factors in Moody's expectation that, assuming the acquisition of Rexam PC is completed, (1) Albéa will have a geographically well-diversified and improved product portfolio; (2) the combined group will hold leading market positions for several product lines; (3) Albéa will benefit from higher barriers to market entry, particularly as a result of the integration of Rexam PC's pumps business; and (4) the two companies will be able to achieve operational synergies, thereby containing costs.

Combining Albéa and Rexam PC will create a well-diversified, global leader in laminate and plastic tubes, foam pumps, fragrance samplers, lipstick and mascara containers. The addition of Rexam PC's pump business will greatly improve the product mix. The group will hold the second largest market share in the fragrance pumps category and the third largest market share in the lotion pumps category. On a pro forma 2011 combined basis, tubes will account for 38% of total revenues, pumps for 23%, while rigid beauty products will account for 39%.

The combined group will also have a strong manufacturing platform, with 47 plants in 14 countries. On a combined, pro forma basis Europe represented 50% of total revenues for the last 12 months ending June 2012, while North America made up 20% and the emerging markets were 30%.

Because beauty and cosmetic products are generally considered discretionary, consumer purchases of these products would be expected to fall during economic downturns, making the group's industry exposed to economic cycles. Nevertheless, beauty and cosmetics markets globally have shown some resilience during downturns, showing less volatility than the gross domestic product indexes of their respective countries.

The beauty and cosmetics packaging industry is competitive, with many manufacturers competing to produce similar and alternate types of packaging. In addition, the main markets for the group's products, Europe and the America, are mature.

After good reported revenue growth of 6.7% in 2011, Albéa saw reported revenue decline year-on-year by 5.8% in H12012, impacted by exchange rate fluctuations, the discontinuation of a key contract in Brazil and challenging conditions in some markets. Nevertheless, H12012 reported EBITDA margin improved by approximately 1% over H12011 because of cost control measures. After reporting growth of 2.4% in 2011, Rexam PC's reported revenues declined by 4.4% year-on-year in H12012 as weaker economic conditions lowered overall demand.

Reported results vary with the fluctuations in exchange rates of operating currencies against the US dollars. On a constant currency basis (average LTM June-12 average foreign exchange rates of US dollars to euros of 1.3 and Brazilian real to US dollars of 1.9), Moody's would expect the group to achieve broadly stable revenue growth for 2012 as compared to 2011.

The integration of Rexam entails significant risk, and in its ratings Moody's considers the possibility that expected synergies will delayed or not realized or costs will be higher than expected. The group intends to achieve $45.5 million in total cost synergies by 2016, $31.4 million by 2014. In order to realize these savings, the group expects to make significant cash outlays. The group currently estimates that through 2016, it will spend approximately $127m in capital expenditures, severance costs and in other cash costs to realize these synergies. It also expects to require approximately $8 million in additional working capital. Such amounts could potentially be partly offset by net compensation proceeds from a government-initiated compulsory purchase order for one of the Asian sites expected to generate approximately $43million. However, there still remains considerable uncertainty around the amount of compensation payable and the timing of receipt of such compensation by the group.

After Albéa and Rexam PC are combined, the group's ten largest customers, by revenue, are likely to account for a significant portion of total revenues. On a pro forma basis, the top ten customers of the group represent 50% of combined revenue, based on 2011 results. Although there is customer concentration, the group has also developed strong long-term relationships with its top clients that on average are over 20 years old. These customers include L'Oréal, LVMH, Estée Lauder, Procter and Gamble, Avon, Natura and GlaxoSmithKline. The group's largest customer, L'Oréal, represented 14% of the combined revenues of Albéa and Rexam PC on a pro forma basis in 2011. None of the group's other customers represented more than 7% of its revenues on a pro forma basis in 2011.

Raw materials accounted for approximately 45% of Albéa's and 23% of Rexam PC's cost of sales for goods manufactured in 2011. Albéa's cost to produce tubes tends to depend more on raw material costs than does Rexam PC's cost to produce pumps, which carry more production costs because of the complexity of the product. Overall, raw materials for Albéa and Rexam PC primarily include plastic resins, closures, plastic film, lacquers, inks, varnishes and various metal parts. The prices for these materials tend to be volatile.

Approximately 74% of Albéa's sales on a standalone basis are currently indexed to raw material prices with escalator and de-escalator mechanisms, which primarily adjust on a quarterly and semi-annual basis. On average, revenue price movements lag purchase price movements by 6-12 months for Albéa. Rexam PC does not have such mechanisms in place. However, after the acquisition, and to the extent possible, Albéa intends to focus on putting similar price mechanisms in place for Rexam's business, a process that could pose some challenges, in Moody's opinion.

The reported LTM June 2012 gross debt (excluding debt issuance costs)/ EBITDA for the group pro forma for the Rexam PC transaction is 4.2x (based on 'Pro forma adjusted EBITDA' of $169.3 million including $19 million of pro forma cost savings and add backs for $23.5 million of exceptional items). Excluding the add backs for exceptional items and pro forma cost savings, the reported pro forma gross leverage of the company group would have been 5.5x (based on a reported pro-forma EBITDA of $126.9 million) for the same period. Given the current capital structure, de-leveraging would rely solely on EBITDA growth. Due to the cash outflows associated with Rexam PC's integration into Albéa, Moody's would expect the combined group's free cash flow (as calculated by Moody's after capex and dividends) to remain negative in the near term. Should the integration of Rexam PC not go according to plan, there is a risk that free cash flow would remain constrained for a period longer than currently envisaged.

Albéa has adequate liquidity for meeting its operational requirements over the next 12-18 months. At closing, the transaction provided the group with some cash over-funding designed to give Albéa the financial flexibility necessary to cover its capex and synergy implementation costs. On a pro-forma basis the group had cash and cash equivalents of $138.7 million as of June 30, 2012. As of June 30, 2012, on a pro-forma basis, the group would have an aggregate $87.8 million of available funding under the European Receivables Facility, of which $34.8 million is expected to be outstanding at closing; and it would also have had $48.1 million of excess availability under the North American ABL Facility. Moody's expects the group to generate negative free cash flow over the medium term, and therefore it could have to rely on its ABL/Factoring facility based on its requirements. After the transaction the group will not face any scheduled debt repayments until 2017 when the ABL becomes due.

WHAT WILL CHANGE THE RATING UP/DOWN

Upward rating pressure could develop (i) with a sustained improvement in the group's EBITDA margin; (ii) if the integration of Rexam PC remains on track and (iii) the group remains on path to returning to positive free cash flow generation on a sustained basis;

Conversely, downward pressure would likely be exerted on the rating as a result of (1) a marked deterioration in the group's operating performance; (2) significant delays in the group integrating Rexam PC, resulting in materially negative free cash flow generation on a sustained basis; and/or (3) a deterioration in the liquidity profile.

PRINCIPAL METHODOLOGY

The principal methodology used in rating Albéa Beauty was the Global Packaging Manufacturers: Metal, Glass, and Plastic Containers Industry Methodology published in June 2009. Other methodologies used include "Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA", published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Albéa Beauty is the holding company of Albéa, which is a market leader in the design, manufacture and sale of plastic packaging products for the beauty and cosmetics industry. The group generated revenues of $1.56 billion and reported EBITDA of $129.7 million in 2011 on a pro-forma basis (including Rexam PC).

REGULATORY DISCLOSURES

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Gunjan DixitAsst Vice President - Analyst Corporate Finance Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Chetan Modi MD - Corporate Finance Corporate Finance Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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