"New Domtar" to get billion-plus credit facility for merger of Weyerhaeuser Paper with Domtar

By Sara Rosenberg

New York, Aug. 23 - "New Domtar" plans on getting a secured credit facility as part of its formation from the combination of Weyerhaeuser Co.'s fine paper business with Domtar Inc., company officials said in a conference call Wednesday.

The credit facility is expected to contain a five-year revolver and a term loan B, officials said in the call.

The term loan B will be close in size to the $1.35 billion needed by the newly formed company for a cash payment to Weyerhaeuser.

Pricing on the term loan B is anticipated in the Libor plus 225 basis points area, officials added in the call.

Under the transaction, Weyerhaeuser shareholders will get a 55% ownership in the new company and former Domtar shareholders will own 45% of the new company. The $1.35 billion cash payment, plus the stock valued at the closing price of Domtar stock on Aug. 22, results in a transaction value of $3.3 billion before considering resulting synergies.

Weyerhaeuser will distribute ownership of the fine paper business and related assets to shareholders in either a spin-off or split-off transaction. A spin-off would involve a pro-rata distribution of shares to Weyerhaeuser shareholders. A split-off would provide Weyerhaeuser shareholders the option to elect to exchange Weyerhaeuser shares for stock in the "New Domtar." The approach to be taken will be determined prior to closing.

The transaction is expected to close in the first quarter of 2007, subject to review by antitrust agencies and securities regulators in the United States and Canada, the receipt of a favorable tax ruling from the U.S. Internal Revenue Service, Domtar shareholder approval and other customary closing conditions.

Weyerhaeuser's financial advisor on the transaction was Morgan Stanley & Co. Inc.

"New Domtar" will be a Montreal, Quebec-based paper company.

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