Correction: Fitch Ratings Downgrades Owens-Illinois; Rating Outlook Stable.

Business Editors

CHICAGO--(BUSINESS WIRE)--Sept. 8, 2003

(This is a revised version of a press release issue on Sept. 5, containing amended company-defined debt/EBITDA information in the seventh paragraph.)

Fitch Ratings has downgraded Owens-Illinois' (NYSE: OI) bank debt and senior secured notes to 'BB-' from 'BB', senior unsecured notes to 'B-' from 'B+', and convertible preferred stock to 'CCC+' from 'B-'. The Rating Outlook is Stable.

The downgrade reflects OI's high leverage position, increased financing costs, and steady margin deterioration, particularly at its plastics business. Also factored into the ratings are the heavy claims on the company's cash flows represented by asbestos liabilities.

The backlog of asbestos cases and associated gross cash outflows continue to trend down (OI spent $221.1 million in asbestos-related payments in 2002, a 10% decline from 2001) and management anticipates asbestos payments will fall moderately over the next couple of years. However, the lack of meaningful insurance proceeds indicates that the company's near-term net cash outflows are expected to stay at historically high levels. When combined with margin erosion, free cash flow available for debt reduction is expected to remain minimal. Total debt outstanding was $5.76 billion at June 30, 2003, up from $5.35 billion at December 31, 2002 and $5.46 billion at June 30, 2002. On July 11, the company received $163 million from the sale of the Ardagh notes receivable, which was used to pay down debt.

OI's glass container business (68% of 2002 net sales) has historically provided relatively stable margins. OI holds a 44% share in the North American glass container market (the North America glass business accounts for about a half of OI's overall glass business), and is characterized by long-term inflation-adjusted contracts with its major customers in North America. However, glass margins have been impacted in 2003 by cold weather, a national strike in Venezuela, higher energy costs and declining non-cash pension income. Over the long-term, margins could be restored through a reversal of these factors, along with continued productivity improvements and price increases.

Consolidated margins have also suffered from the company's plastics operations (31% of 2002 sales), which remain under intense pricing pressure. While OI focuses on technology to avoid commodity-type products and continues to enjoy high margins in certain markets, overall competition has been severe, impacted by customer consolidation. Adjusted segment EBITDA margin fell to 19.6% for the last twelve months (LTM) ending June 30, 2003 from 22.5% in 2002. Adjusted EBITDA margin in 2000 was 22.9%.

For OI on a consolidated basis, reported EBITDA margins declined to 21.3% for LTM June, from 23.1% in 2002, 24.3% in 2001, and 25% in 2000. Without the effect of declining pension income, EBITDA margin for the first six months would have been 142 basis points higher. Deteriorating margins, combined with asbestos payments, will continue to pressure cash flow available for debt reduction.

Total debt increased by $411.2 million during the first six months of 2003. Foreign currency movements have partially inflated debt as well. Total secured debt has also risen to $3.87 billion at June 30, 2003 from $3.65 billion at December 31, 2002. Total debt/EBITDA for LTM June rose to 4.64 times (x) (the company-defined debt/EBITDA was 4.40x) from 4.08x (3.91x) in 2002 and secured LTM debt/EBITDA was 3.12x at June-end, compared with 2.78x at December-end, resulting in a deterioration of the position of unsecured creditors.

Owens-Illinois is the largest manufacturer of glass containers in North America, South America, Australia and New Zealand, and one of the largest in Europe. OI also is a worldwide manufacturer of plastics packaging with operations in North America, South America, Europe, Australia and New Zealand.