Reynolds Group $5 billion debt financing to come from loans and notes

By Sara Rosenberg

New York, Aug. 18 - Reynolds Group Holdings Ltd.'s $5 billion debt commitment for the acquisition of Pactiv Corp. is expected to be comprised of new term loans, senior secured notes and senior unsecured notes, company officials said in a conference call on Wednesday.

The sizes of the new term loans and notes are still to be determined, with the commitment package described by officials as being very flexible.

Currently, the company has room for $750 in incremental term loans under its existing credit facility, but, it is possible that it will seek more term loan borrowings than are permitted under the accordion feature. If that happens, an amendment of the existing facility will be needed.

Discussions with existing credit facility lenders have not been initiated as of yet.

Most of the new debt is expected to be raised in the United States, but the company can raise some in Europe, too. "We'll look at Europe, but not sure that we'll get there," officials remarked.

The financing package will comply with the company's current credit facility covenant requirements of maximum first-lien leverage of 3.5 times and total leverage of 5.5 times, officials added in the call.

Credit Suisse, HSBC and Australia New Zealand Bank are the lead banks on the debt financing.

Other funds for the acquisition will come from equity from Reynolds and its parent company, Rank Group Ltd.

Under the terms of the agreement, Pactiv shareholders will receive $33.25 in cash per share, for a total purchase price of $4.6 billion. However, the transaction is valued at $6 billion.

Closing is targeted by the end of this year, subject to Pactiv shareholder approval, regulatory approvals and customary conditions.

Reynolds is a Chicago-based manufacturer and supplier of consumer food and beverage packaging and storage products. Pactiv is a Lake Forest, Ill.-based consumer and foodservice/food packaging company.

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