Reynolds Group to use $5 billion of new debt for Graham buyout bid

By Sara Rosenberg

New York, June 14 - Reynolds Group Holdings Ltd. expects to get up to $5 billion of new debt and to use cash on hand to fund its acquisition proposal for Graham Packaging Co. Inc., according to a news release.

Reynolds is offering to buy Graham for $25 per share in cash, an offer that Graham considers to be superior to its pending acquisition by Silgan Holdings Inc.

Silgan has three business days to make a responsive offer.

The Reynolds offer has a total enterprise value, including net debt, of $4.5 billion.

The proposed transaction is expected to close in the second half of this year, subject to customary regulatory approvals and closing conditions, including the approval of Graham's stockholders.

Pro forma for the acquisition, Reynolds Group's leverage ratio is expected to increase by 0.5 times.

As part of the transaction, Reynolds Group intends to repay Graham's existing credit facilities. A decision has not yet been made as to whether it will retire Graham's existing senior unsecured notes and senior subordinated notes. To the extent these notes remain outstanding after the acquisition, Graham will be required to make a change of control offer.

In April, Silgan entered into a definitive agreement to purchase Graham for 0.402 shares of Silgan common stock and $4.75 in cash per share, representing a total enterprise value, including net debt, of $4.1 billion.

To help fund the acquisition, Silgan has received a commitment for a $4 billion senior secured credit facility (Ba1/BBB-), consisting of an $800 million five-year revolver, a $900 million six-year term loan A and a $2.3 billion seven-year term loan B.

According to filings with the Securities and Exchange Commission, the revolver and term loan A are expected to be priced at Libor plus 250 basis points, and the term loan B is expected at Libor plus 325 bps with a 1% Libor floor and would include 101 soft call protection for one year.

Silgan also plans on getting $400 million of senior subordinated unsecured notes that are backed by a $400 million bridge loan priced at Libor plus 625 bps with a 1.5% Libor floor. The spread will increase by 50 bps at the end of each three-month period.

Deutsche Bank Securities Inc., Bank of America Merrill Lynch, Citigroup Global Markets Inc. and Wells Fargo Securities LLC are the lead banks on Silgan's debt financing.

Reynolds Group is an Auckland, New Zealand-based manufacturer and supplier of consumer food and beverage packaging and storage products. Graham is a York, Pa.-based supplier of plastic containers. And Silgan is a Stamford, Conn.-based manufacturer of consumer goods packaging products.

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