S&P upgrades Packaging Corp. rating to BBB+ on low leverage

On Wednesday, S&P Global Ratings upgraded Packaging Corp. of America (PKG) from a BBB credit rating to a BBB+ rating, attributing the change to the company's consistent low leverage despite its recent acquisition of Greif's containerboard business. The credit agency maintains that PCA's leverage, including the acquisition financing, remains below 2.0x.

PKG financed the $1.8 billion acquisition with $1 billion in term loans, $300 million in cash, and $500 million in unsecured notes. The company's leverage has been below 2.0x in all four fiscal years prior to the Greif acquisition, averaging around 1.2x.

PCA announced three price increases in 2026, the latest being $140 per ton effective September 1. Prior hikes were $50 and $70 per ton. The company anticipates generating around $60 million annually in synergies from the Greif acquisition, expected to be realized by the end of 2027.

The Greif acquisition includes two containerboard mills and 800,000 tons of capacity, plus eight sheet feeder and corrugated plants across the U.S. PCA is North America's third-largest producer of containerboard and corrugated products, boasting market-leading margins above 21%.

Looking ahead, S&P expects the company's adjusted leverage to be 1.7x by year-end, decreasing to 1.4x in 2027. Revenue is forecast to rise mid- to high-single-digit percent in 2027, with S&P Global Ratings-adjusted EBITDA margins expected to stay above 23%. PCA aims for full mill utilization throughout the year, minimizing downtime.