Rock-Tenn to get $700 million credit facility for purchase of Gulf States business

By Sara Rosenberg

New York, April 28 - Rock-Tenn Co. plans on getting a new $700 million five-year senior unsecured credit facility to help finance its acquisition of Gulf States Paper Corp.'s Pulp and Paperboard and Paperboard Packaging business for $540 million, company officials revealed in a conference call Thursday.

The facility is expected to consist of a $250 million term loan and a $450 million revolving credit facility.

Wachovia Capital Markets LLC, SunTrust Capital Markets Inc. and Banc of America Securities LLC are the lead banks on the deal.

Following the transaction announcement, Standard & Poor's lowered Rock-Tenn's corporate credit and senior unsecured note ratings to BB from BBB- and placed them on CreditWatch negative because of the excess debt being used to finance the deal.

And later in the day, Moody's Investors Service put Rock-Tenn's Baa3 senior unsecured ratings under review for possible downgrade.

When asked about being downgraded to below-investment-grade status by S&P, company officials said in the call, "we think we can return in a relatively short period of time, and that is two to three years, to credit profiles approximating what we had at the outset.

"I think S&P's view of us reflects the current weakness in our operations, which we don't think will be sustained but they are what they are. But also I think a negative view with respect to the industry. Certainly, I think our business profile improves with this acquisition but they look at the leverage ratios and say they're just outside our range," officials added in the call.

The company also said that it's targeting a three-year debt reduction of $180 million through cash flow.

The acquisition, which is expected to close in early June, is subject to Hart-Scott-Rodino review and other customary closing conditions.

Rock-Tenn is a Norcross, Ga., manufacturer of recycled paperboard, folding cartons and promotional displays.

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