Fitch Ratings has affirmed Reynolds Consumer Products LLC (Reynolds) and Reynolds Consumer Products Inc.'s Long-Term Issuer Default Ratings (IDRs) at 'BB+'.

Fitch has also affirmed the 'BBB-'/'RR1' ratings on Reynolds' first-lien secured revolving credit facility and term loan. The Rating Outlook is Stable.

Reynolds' rating reflects its leading market position, supported by innovation and conservative financial policies. EBITDA leverage is expected to remain below 3x across the rating horizon. The ratings also reflect the company's good liquidity, supported by FCF in the $150 million-$200 million range annually, which could be used to reinvest into the business or further reduce debt.

Reynolds' rating also reflects its relatively smaller scale and lower degree of diversity compared to larger consumer goods companies. The company also has exposure to raw material prices that can lead to periods of earnings volatility.

Key Rating Drivers

Leading U.S. Market Share: Reynolds holds a No. 1 or 2 U.S. market share position in the majority of product categories in which it participates. The company has the largest market share in the consumer aluminum foil markets in both the U.S. and Canada. Over 65% of Reynolds' 2023 revenue was attributed to products where the company held the leading market share position in the category.

The company leverages both branded and private label offerings, allowing it to maintain a prominent and defensible shelf space position with its retail partners. The company has three main product groups: waste and storage at 41% of 2023 sales, cooking products at around 34% and the remainder in tableware.

Deleveraging Capacity; Conservative Financial Policy: Reynolds' EBITDA leverage could decline to around 2.6x in 2024 (on a Fitch calculated basis), compared to around 2.8x in 2023 and a peak of 3.8x in 2022. Reynolds used FCF to repay over $400 million in debt between 2021 and 2023, which combined with EBITDA expansion has supported its deleveraging. The use of FCF to repay debt demonstrates both willingness and capacity to delever toward its net debt leverage target of 2.0x-2.5x, which is roughly in line with Fitch-calculated EBITDA leverage less the impact of cash on balance sheet.

Sales Decline in 2024; Growth Longer Term: Fitch's base case assumes sales could be down in the mid-single digit range in 2024, driven by factors such as declines in the low margin non-retail sales, volume declines in tableware and increased promotional activity. Innovation and increased focus on marketing and advertising should support stable to modest growth in market share in 2024, and a return to low single digit organic revenue growth starting in 2025. Longer term, Fitch believes that Reynolds' organic growth rate could be in the low single digit range, supported by continued investments in the business and household formation trends.

Potential for Profit Volatility: Reynolds' exposure to raw material prices (aluminum and resin make up around 40% of raw material costs) can meaningfully impact profitability. Considering the potential lag in timing between input cost increases and the company's ability to increase prices, this creates potential for earnings volatility. Input cost increases combined with operational issues led to Reynolds' EBITDA margins declining to the 14%-17% range in 2021 through 2023 from around 22% in 2019.

Fitch expects margins to improve to the mid-18% range in 2024. Considering the recent period of volatility, Fitch would need to see a track record of stability in Reynolds' operations before contemplating upward momentum on its rating.

Category Innovator: Reynolds has been an innovation leader within the categories which it operates. Fitch believes this is particularly important in mature markets with high levels of competition. Innovations such as using recycled materials and the introduction of value-added features to traditional products to address consumer needs, have helped the company gain and sustain market share. Reynolds has stated that over 20% of its sales in 2023 were from products that were introduced to the market over the past three years.

Limited Diversification and Smaller Scale: Relative to larger consumer goods companies, Reynolds' smaller scale (measured by EBITDA) and lower degree of diversification results in reduced ability to navigate macroeconomic or idiosyncratic challenges. Reynolds performance is largely driven by two brands, Reynolds and Hefty. The company lacks the size and breadth of portfolio of larger consumer goods companies with more diversified portfolios that may include cleaning agents, personal care, and health and wellness segments. This lower degree of diversity is in part offset by its conservative financial policies and strong market share in many of the categories in which it operates.

Growing EBITDA: Reynolds' EBITDA could be around $670 million in 2024, which is modest growth compared to the $650 million generated in 2023. The expansion in EBITDA is supported by a full year of normalized operations in the Cooking and Baking segment, as well as the impact of continued cost structure improvements. Reynolds' EBITDA could continue to grow in 2025 and 2026, driven by a return to low organic sales growth and continued focus on cost structure improvements. However, Fitch's base case assumes that EBITDA margins remain in the high teen range, below pre-pandemic levels in the low 20% range.

Parent Subsidiary Linkage: Fitch's analysis includes a weak parent/strong subsidiary approach between the parent and its subsidiary Reynolds Consumer Products, LLC. Fitch assesses the quality of the overall linkage as high, which results in an equalization of IDRs across the corporate structure.

Derivation Summary

Reynolds' 'BB+'/Stable rating reflects its leading market position in the categories in which it participates, strong innovation pipeline. The ratings also reflect Fitch's expectation that Reynolds Fitch-calculated leverage (total debt/EBITDA) will decline to around 2.6x in 2024 on EBITDA expansion and the use of FCF to reduce debt. The company's exposure to raw material prices, as well as weakness in the Cooking & Baking segment, resulted in recent earnings volatility and a meaningful contraction in its margins from 2021 through 2023 compare to pre-pandemic levels.

However, Fitch expects EBITDA margins to recover gradually to the mid 18% range in 2024. The rating also considers Reynolds' limited scale and diversification compared to larger, well-capitalized CPG competitors.

Similarly rated credits in Fitch's consumer portfolio include Mattel (BBB-/Stable), Hasbro (BBB-/Negative) and Tempur Sealy International Inc. (TPX; BB+/Rating Watch Negative). Reynolds' scale, measured by EBITDA, is smaller than Mattel, Hasbro, and TPX. Reynolds' leverage could be similar to higher rated peer Mattel, but is expected to be lower than its other consumer goods peers across the ratings horizon (assuming TPX's proposed acquisition of Mattress Firm closes).

Key Assumptions

Sales decline around 5% to around $3.58 billion in 2024, driven by factors such as a decline in non-retail sales, lower volumes in tableware, and increased promotional activity. Growth could be in the low single-digit range thereafter driven by new product launches and volume normalization;

EBITDA of around $670 million in 2024, driven by margins improving to the mid 18% range. EBITDA margins could further improve to the high 18% range between 2025 and 2026 supported by Reynolds' focus on improving its cost structure and through top line growth;

FCF in the $150 million-$200 million range annually between 2024-2026, assuming capex of around 3% of sales and annual dividends of around $200 million. Reynolds could deploy cash toward debt repayment, reinvestment in business to support organic growth, and bolt-on acquisitions;

EBITDA leverage anticipated to be around 2.6x in 2024 (2.8x at YE 2023) and remain below 3x across the rating horizon assuming no debt financed;

Base interest rates in the 550bps-400bps range between 2024 and 2026, with annual interest expense partially offset by the company's interest rate hedges.


Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

An upgrade could be considered if the company exhibited low single digit organic growth and EBITDA was sustained in the $700 million range, with gross EBITDA leverage sustained below 3.0x.

Alternatively, should Reynolds undertake portfolio actions that materially increased scale above $1 billion in EBITDA, Fitch could upgrade Reynolds to 'BBB-' if EBITDA leverage is sustained under 3.5x.

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

EBITDA leverage sustained above 4.0x as a result of financial performance below Fitch's expectations yielding EBITDA sustained in the low $500 million range;

A change in financial policy or a transformative debt-funded acquisition absent a clear path to deleveraging to below 4.0x within 24 months of acquisition close could also lead to negative rating actions.

Liquidity and Debt Structure

Good level of Liquidity: As of Dec. 31, 2023, Reynolds had total liquidity of $293 million, including cash and cash equivalents of $50 million and $244 million available under its $250 million secured revolving credit facility due in February 2026 (net of $6 million of letters of credit outstanding). Liquidity is supported by Fitch's expectation that the company will generate between $150 and $200 million in post-dividend FCF annually between 2024 and 2026. This good liquidity buffer should provide Reynolds with the resources to continue investing in its business in order to drive growth as well as navigate any operating challenges that may occur.

In addition to the $250 million revolver, the company's debt capital structure at the end of 2023 includes around $1.85 billion in first-lien secured term loan debt maturing in February 2027. During the year 2023, the company made voluntary payments of $250 million on the term loan facility, which were first applied to pay the remaining balance of amortization payments in full, and the balance applied to the outstanding principal.

Reynolds' term loan and revolver are guaranteed by wholly owned domestic subsidiaries as well as Reynolds Consumer Products Inc., and secured by a first priority pledge of all equity interests held by the borrower and guarantors, and priority security interest in all other assets.

Fitch has assigned Recovery Ratings (RRs) to the various debt tranches in accordance with Fitch criteria, which allows for the assignment of RRs for issuers with IDRs in the 'BB' category. Given the distance to default, RRs in the 'BB' category are not computed by bespoke analysis. Instead, they serve as a label to reflect an estimate of the risk of these instruments relative to other instruments in the entity's capital structure. Fitch has assigned the first-lien credit facilities (term loan and revolver) a 'BBB-'/'RR1' rating, indicating outstanding recovery prospects post default.

Issuer Profile

Reynolds produces and sells cooking products, waste and storage products, and tableware under brands such as Reynolds and Hefty as well as store brands. The product portfolio includes aluminum foil, wraps, disposable bakeware, trash bags, food storage bags and disposable tableware.

Summary of Financial Adjustments

Historical and projected EBITDA is adjusted to add back non-cash stock-based compensation and exclude non-recurring charges.


The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit

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