By Paul Deckelman
New York, July 26 - Reynolds Group Issuer LLC, Reynolds Group Issuer Inc. and Reynolds Group Issuer (Luxembourg) SA priced their upsized $2.5 billion offering of eight-year senior secured and unsecured notes on Tuesday, high-yield primary sources said.
The eagerly awaited deal was said to be multiple-times oversubscribed and played to a range of investors beyond just the domestic high-yield market.
The issuers - units of Auckland, New Zealand-based consumer food and beverage packaging products producer Reynolds Group Holdings Ltd. - priced $1.5 billion of 7 7/8% senior secured notes (Ba3/BB-) at 99.268 to yield 8% and $1 billion of 9 7/8% senior unsecured notes (Caa1/B-) at 99.318 to yield 10%.
Reynolds had announced on Monday that the senior unsecured tranche would be doubled in size to $1 billion from the originally planned $500 million. The senior secured tranche was left unchanged at $1.5 billion.
Both tranches, which are due on Aug. 15, 2019, priced in line with their respective pre-deal market price talk of a yield in the 8% area for the secured piece and in the 10% area for the unsecured tranche.
The issue is being sold under Rule 144A and Regulation S with registration rights and came to market via joint book-running managers Credit Suisse Securities (USA) LLC and HSBC Securities (USA) Inc. The bonds were marketed to potential investors via a roadshow that began last Tuesday, and the order books closed on Monday afternoon.
Both tranches come with four years of call protection, including a make-whole call covering that period, and feature the standard three-year equity clawback for up to 35% of the issue, and both have 101% change-of-control put provisions. They also have a provision calling for a special mandatory redemption of the whole issue should Reynolds not be able to complete its acquisition of Graham Packaging Co. Inc. - whose purchase is being partially funded out of the bond deal proceeds - by March.
Reynolds - whose products include the well-known Reynolds Wrap aluminum foil - announced on June 17 that it would acquire Graham, a York, Pa.-based maker of customized blow-molded plastic bottles and jars, for $25.50 per share in cash, or $1.68 billion total, with the transaction having a total enterprise value of $4.5 billion, including the assumption by Reynolds of Graham's net debt. Reynolds' bid for Graham topped a rival offer for the company from Stamford, Conn.-based sector peer Silgan Holdings Inc. Reynolds further announced in early July that it would line up $2 billion of senior secured term loan financing from its lenders and sell $2 billion of bonds, split into the senior secured and unsecured tranches.
Reynolds, in announcing the upsizing of the senior tranche on Monday, said that the net proceeds from the increase in the size of the bond deal will be used to repurchase any of Graham's $500 million of existing 8¼% senior notes due 2017 and 2018 that are tendered in connection with change-of-control offers at 101% of par that will be made following the closing of the Graham acquisition. Any remaining net proceeds from the upsizing of the bond deal will be applied to repay borrowings coming due in the near-term or to repay, repurchase or otherwise retire other debt.
The new Reynolds secured notes come with the same guarantees and security as the Reynolds Group Issuer Entities' 6 7/8% senior secured notes due Feb. 15, 2021, while the unsecured notes are guaranteed by the same entities that guarantee the Reynolds Group Issuer Entities' 8¼% senior notes due Feb. 15, 2021.
| Issuers: | Reynolds Group Holdings Ltd. subsidiaries Reynolds Group Issuer LLC, Reynolds Group Issuer Inc. and Reynolds Group Issuer (Luxembourg) SA
|
| Face Amount: | $2.5 billion (upsized from originally announced $2 billion)
|
| Maturity: | Aug. 15, 2019
|
| Bookrunners: | Credit Suisse Securities (USA) LLC, HSBC Securities (USA) Inc.
|
| Make-whole call: | Callable prior to first call date at redemption price of par plus greater of (i) 1% and (ii) a make-whole of Treasuries plus 50 basis points
|
| Mandatory redemption: | On March 23, 2012 if Reynolds fails to complete its Graham Packaging acquisition by March 20, 2012; could occur earlier if the merger agreement with Graham terminates prior to March 20, 2012
|
| Change-of-control put: | 101%
|
| Trade date: | July 26
|
| Settlement date: | Aug. 9
|
| Distribution: | Rule 144A and Regulation S (with registration rights)
|
| Marketing: | Roadshow began July 19
|
|
|
| Tranche 1
|
| Face Amount: | $1.5 billion
|
| Proceeds: | $1,489,020,000
|
| Securities: | Senior secured notes
|
| Coupon: | 7 7/8%
|
| Price: | 99.268
|
| Yield: | 8%
|
| Spread: | 545 basis points versus 3 5/8% U.S. Treasury due Aug. 15, 2019
|
| Call features: | Non-callable (other than make-whole) until Aug. 15, 2015, then at 103.938, 101.969, finally at par on or after Aug. 15, 2017
|
| Equity clawback: | For up to 35% of issue at 107.875 until Aug. 15, 2014
|
| Ratings: | Moody's: Ba3
|
| Standard & Poor's: BB-
|
| Price talk: | 8% area
|
|
|
| Tranche 2
|
| Face Amount: | $1 billion (upsized from originally announced $500 million)
|
| Proceeds: | $993,180,000
|
| Securities: | Senior unsecured notes
|
| Coupon: | 9 7/8%
|
| Price: | 99.318
|
| Yield: | 10%
|
| Spread: | 745 basis points versus 3 5/8% U.S. Treasury due Aug. 15, 2019
|
| Call features: | Non-callable (other than make-whole) until Aug. 15, 2015, then at 104.938, 102.469, finally at par on or after Aug. 15, 2017
|
| Equity clawback: | For up to 35% of issue at 109.875 until Aug. 15, 2014
|
| Ratings: | Moody's: Caa1
|
| Standard & Poor's: B-
|
| Price talk: | 10% area
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