Ring Container Technologies Group LLC

The stable outlook on Ring Container Technologies Group LLC reflects our expectation that the company will continue to increase the revenue from its high density polyethylene (HDPE) and polyethylene terephthalate (PET) applications, which--coupled with its maintenance of above-average margins--will enable it to sustain leverage of less than 5x over the next 12 months. We could lower our ratings on Ring if we expect its leverage to increase above 6.5x on a sustained basis with no clear prospects for improvement. This could occur if the company's operating performance deteriorates materially because of increasingly competitive market conditions, volatile raw material costs, the loss of a key customer, large debt-financed capital expenditure or acquisitions, or debt-funded shareholder returns. Although unlikely over the next

...The company benefits from long-term contracted revenues. Ring's exposure to swings in the prices of its key inputs, such as resin and corrugate, is a risk; however, the majority of the company's revenue is contracted on a long-term basis. Furthermore, the company also has the ability to pass through increases in raw material prices to its customers with limited lag. Nonetheless, in our view these positive factors are partially offset by the small scale of its operations, its high customer concentration, and its limited diversity. Improving margins should enable the company to reduce leverage below 5x. We expect Ring's debt leverage to be about 5x in fiscal year 2019 and believe that its good prospects, including its strong organic growth and favorable pricing, will continue to improve its margins and reduce its leverage below 5x by fiscal year 2020. However, we do not anticipate taking any positive actions on our rating on the company given its financial-sponsor ownership, which remains...

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