Reynolds American draws entire $500 million of delayed-draw term loan

By Angela McDaniels

Tacoma, Wash., April 12 - Reynolds American Inc. borrowed the entire $500 million amount under its delayed-draw term loan on Wednesday, according to an 8-K filing made Friday with the Securities and Exchange Commission.

The company arranged the term loan on March 15 and had until April 17 to make the draw. The loan matures on Dec. 27, 2013.

The initial interest rate is 1.71%. The margin over Libor ranges from 125 basis points to 225 bps based on the company's senior long-term debt credit rating.

The term loan may be prepaid at any time without penalty or premium, subject to the payment of any eurodollar breakage costs, if applicable.

JPMorgan Chase Bank, NA is the administrative agent. Citibank, NA is the syndication agent. Fifth Third Bank, Mizuho Corporate Bank, Ltd., Royal Bank of Canada and Scotiabanc Inc. are the documentation agents. J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Fifth Third, Mizuho, RBC Capital Markets and Scotiabank are joint lead arrangers and joint bookrunners.

The company expects to use the proceeds for general corporate purposes, which may include making payments under its master settlement agreement with states resolving state health-care cost recovery claims and/or repurchasing shares.

The company is required to maintain a minimum consolidated interest coverage ratio of 4 to 1 and a consolidated leverage ratio of no more than 3 to 1.

Reynolds American is a Winston-Salem, N.C.-based manufacturer and seller of cigarettes and other tobacco products.

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