Packaging Corp. announces note sale, proceeds to fund tender for 9 5/8% '09 notes

New York, July 14 - Packaging Corp. of America (Ba2/BBB-) said it would offer to sell $550 million in aggregate principal amount of new five and 10-year senior notes in a Rule 144A transaction, with the net proceeds of the offering, together with available cash and borrowings under a new senior unsecured credit facility, to be used to purchase all its outstanding 9 5/8% series B senior subordinated notes due 2009 via a previously announced tender offer and consent solicitation.

As previously announced, Packaging Corp., a Lake Forest, Ill. packaging company, said on June 23 that it was starting a cash tender offer for all of its $550 million of 9 5/8% notes, and was also soliciting consents to amend the notes' indenture to eliminate substantially all restrictive covenants and certain event of default provisions.

It set 5 p.m. ET on July 7 as the now-expired consent deadline and said the tender offer would expire at midnight ET on July 21, with both deadlines subject to possible extension.

Packaging Corp. said it was offering to pay a price based on an assumption that the notes would be redeemed on the earliest redemption date of April 1, 2004 at the call price of $1,048.13 per $1,000 principal amount. Up to that redemption rate, Packaging Corp. is offering a yield equal to 62.5 basis points over the bid-side yield of the 3 5/8% Treasury note due March 31, 2004. The price would include a consent payment of $20 per $1,000 principal amount of the notes for those notes tendered by the consent deadline.

Notes tendered after the consent deadline would not receive the consent payment.

The company also said that notes not tendered would be redeemed as soon as possible after the earliest redemption date at the redemption price of 104.8125% of the principal amount.

Packaging Corp. said it would finance the tender offer with a private placement of new notes, proceeds of a new bank credit facility and cash on hand.

On July 7 Packaging Corp. announced that it had received sufficient consents to the proposed indenture terms from the 9 5/8% noteholders by the now-expired consent deadline. It said that notes which had been tendered could no longer be withdrawn and the related consents could not be revoked, except in limited circumstances described in the official Offer to Purchase.

Accordingly, Packaging Corp. and the notes' indenture trustee said they planned to promptly execute and deliver a supplemental indenture incorporating the proposed amendments, although the company also said that the amendments would not become operative unless and until Packaging Corp. were to accept the notes for purchase under the terms of the tender offer following its expiration. Once the proposed amendments become operative, holders of all the notes then outstanding will be bound by them.

Morgan Stanley (800 624-1808 or 212 761-1123 (collect), attention: Jeff Kelly) and Goldman Sachs (877 686-5059 or 212 357-5680 (collect), attention: Liability Management Group) are dealer managers for the tender and Georgeson Shareholder Communications (800-248-3170) is information agent.

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