Reynolds American enters into $2 billion revolver with JPMorgan Chase

By Jennifer Chiou

New York, Dec. 19 – Reynolds American Inc. entered into a credit agreement with JPMorgan Chase Bank, NA as administrative agent, providing for a $2 billion senior revolving credit facility, according to an 8-K filed with the Securities and Exchange Commission.

The size may be increased to $2.35 billion at the discretion of the lenders.

Proceeds may be partially used for financing Reynolds’ acquisition of Lorillard Inc. When the company detailed its $9 billion 364-day senior term loan bridge facility in July this year, it said that it intended to finance the acquisition with available cash, up to $500 million of borrowings under its existing revolving credit facility, proceeds from the issuance of debt securities, the proceeds of an asset purchase and share purchase and, only to the extent necessary, borrowings under the bridge loan.

The new credit agreement has a $300 million sublimit for letters of credit.

Citibank, NA acted as syndication agent with Credit Suisse AG, Cayman Islands Branch, Fifth Third Bank, Goldman Sachs Bank USA, Mizuho Bank, Ltd., Royal Bank of Canada and the Bank of Nova Scotia as documentation agents.

J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities (USA), LLC, Fifth Third Bank, Goldman Sachs Bank USA, Mizuho Bank, Ltd., RBC Capital Markets and the Bank of Nova Scotia are joint lead arrangers and joint bookrunners.

This agreement replaces Reynolds American’s credit agreement dated Oct. 8, 2013.

Under the new credit agreement, the consolidated leverage ratio may not exceed

• 3.00 to 1.00 as of the last day of any period of four consecutive fiscal quarters ending prior to the closing of the merger;

• 4.50 to 1.00 for the reference periods ending on the last day of the fiscal quarter in which the merger closes and on the last day of the next two succeeding fiscal quarters;

• 4.25 to 1.00 for the reference periods ending on the last day of the next three succeeding quarters;

• 3.75 to 1.00 for the reference periods ending on the last day of the next three succeeding quarters; and

• 3.50 to 1.00 thereafter.

The filing added that the company’s consolidated interest coverage ratio for any reference period ending on the last day of a fiscal quarter may not be less than 4.00 to 1.00.

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

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