Reynolds plans Monday launch for secured debt for Pactiv acquisition

By Paul A. Harris

St. Louis, Sept. 7 - Reynolds Group Holdings Ltd. plans to hold a bank meeting on Monday for the senior secured debt financing backing its acquisition of Pactiv Corp., according to a market source.

Further details are expected before the end of the week, the source added.

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.

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

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 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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