New York, December 10, 2012 -- Moody's Investors Service assigned Graphic Packaging International Inc's ("Graphic Packaging") proposed $300 million term loan due 2017 a Ba2 rating and affirmed the company's Ba3 corporate family rating and SGL-2 speculative grade liquidity rating. The rating outlook remains positive.

The rating affirmation and positive rating outlook reflect our expectation that Graphic Packaging's credit measures will improve over the next 12 to 18 months from a combination of modest earnings improvement and debt reduction. While the proposed term loan borrowing coupled with drawings under the company's revolver to fund two recently announced acquisitions will initially increase the company's adjusted leverage above 4x (pro forma September 2012), we expect that the company's ability to generate cash flow and pay down debt will result in leverage of around 3.5 to 4x over the next 12 to 18 months.

Assignments:

..Issuer: Graphic Packaging International Inc.

....Senior Secured Bank Credit Facility, Assigned Ba2 (LGD3, 33%)

Graphic Packaging intends to use the net proceeds from the proposed term loan to fund a direct share repurchase from its existing ownership group. The proposed term loan will have identical terms and conditions to the company's existing Ba2 rated $988 million term loan. This includes guarantees from parent entities, guarantees from direct and indirect domestic subsidiaries, being secured by substantially all of the company's assets and ranking senior to all of the company's unsecured indebtedness. The proposed term loan will have the same rating as the company's senior secured revolver and the senior secured term loans (Ba2, one notch above the Ba3 CFR), reflecting their preferential position in the capital structure and the loss absorption cushion provided by the $675 million of unsecured notes and other unsecured obligations. The rating is subject to the conclusion of the proposed transaction and Moody's review of final documentation.

RATINGS RATIONALE

Graphic Packaging's Ba3 corporate family rating reflects expected adjusted leverage of about 3.5 to 4x and steady operating performance that benefits from providing packaging for the relatively stable food and beverage segment. The rating is supported by the company's relatively low cost vertically integrated asset base and the company's leading industry position in the North American folding cartons packaging industry. The rating is constrained by the company's exposure to volatile fiber and energy costs and the expectation of continued acquisitions.

Graphic Packaging's SGL-2 liquidity rating indicates good liquidity. This is supported primarily by about $515 million of availability under the company's $1 billion senior secured revolving credit facility that matures in March 2017 and approximately $36 million of cash on-hand (as of September 2012 proforma for drawdown for European acquisitions). We estimate that Graphic Packaging will generate about $220 million of annual free cash flow and will remain in compliance with its debt covenants over the next 12 months. The company has modest near-term debt maturities of about $60 million. Most of the company's assets are encumbered.

The positive outlook reflects our expectation that the company will continue to generate strong financial and operating results. We also expect the company will benefit from continued debt reduction, improved productivity and growing geographic diversification through the integration of its recently acquired European operations. We could upgrade the ratings if Graphic Packaging is able to maintain a good liquidity position and sustain normalized (RCF-Capex)/Debt of around 10% and Debt/EBITDA of around 3.5x (including Moody's standard adjustments). While there is limited downward pressure on the ratings, the outlook would be stabilized should the company face significant price and volume deterioration, material deterioration in liquidity arrangements, (RCF-Capex)/Debt of around 5%, or if Debt/ EBITDA remains above 4.0x on an adjusted basis.

The principal methodology used in rating Graphic Packaging was the Global Paper and Forest Products Industry Methodology published in September 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.

Graphic Packaging, headquartered in Atlanta, Georgia, is a leading provider of paperboard packaging solutions. The company manufactures and supplies folding cartons and multi-pack beverage carriers, coated unbleached kraft paperboard, coated recycled board, and machinery-based packaging systems for the food and beverage industry. The company is also a leading supplier of flexible packaging, including multi-wall bags, plastics and labels. Graphic Packaging generated approximately $4.3 billion in revenue (LTM September 2012).

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Anna Zubets-Anderson Vice President - Senior Analyst Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Brian Oak MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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