ProAmpac PG Intermediate LLC

We estimate ProAmpac's interest coverage should be in low-2x area, which should provide sufficient liquidity to cover ongoing debt servicing requirements without consistently relying on its revolving credit facility. However, any unforeseen integration challenges or increase in working capital needs could pressure the company's operating cash flows such that it becomes increasingly dependent on its revolver. The stable outlook reflects our expectation that ProAmpac's growing sales pipeline, successful integration of ongoing acquisitions, and improving operating margins will enable the company to maintain positive free operating cash flows and maintain debt leverage in the 7x-8x range. We could lower our ratings on ProAmpac if: Deteriorating operating performance constrained its liquidity position such that interest coverage fell below 1.5x; The company's cash

...Europe will be a focus of future acquisitions. Five out of the seven acquisitions ProAmpac PG Intermediate LLC completed in 2021 were based in Europe. Our understanding is the acquisition of Rapid Action Packaging provided ProAmpac with the foundation in material science to quickly build out its European presence. We believe Europe has a more fragmented packaging market than the U.S. market, which will provide the company with ample runway to employ the same acquisition-led growth strategy it has used to build out its North America business. Margin pressures remain but should somewhat subside. Rising raw material costs, labor constraints, and general inflation stemming from the pandemic pressured ProAmpac's operating margins in 2021. Over the coming quarters, we expect some modest margin expansion as recent price increases should flow through beginning the fourth quarter of 2021. However, wage inflation, labor shortages, and ongoing logistics and supply chain issues are unlikely to materially...

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