Reynolds Group Holdings commitment provides for $5 billion in secured, unsecured bridge loans

By Sara Rosenberg

New York, Aug. 31 - Reynolds Group Holdings Ltd.'s debt financing commitment for the acquisition of Pactiv Corp. is comprised of a $3.5 billion secured bridge loan and a $1.5 billion unsecured bridge loan, according to a PREM14A filed with the Securities and Exchange Commission on Tuesday.

The secured bridge loan may be reduced by the sale of senior secured notes, and the unsecured bridge loan may be reduced by the sale of senior unsecured notes.

Additionally, the company has the right to pursue alternative financing arrangements, including new bank loans under its existing credit facility.

Credit Suisse, HSBC and Australia and New Zealand Banking Group are the lead banks on the financing.

Upon announcing the acquisition earlier this month, Reynolds said that the $5 billion in debt needed for the transaction would come from new term loans, senior secured notes and senior unsecured notes.

Currently, the company has room for $750 million in incremental term loans under its existing credit facility, but officials previously stated that 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.

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.

Other funds for the acquisition will come from roughly $2 billion in 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. The acquisition is not conditioned on the receipt of equity or debt financing.

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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