Rock-Tenn plans $1 billion credit facility, $400 million notes for Southern Container purchase

By Sara Rosenberg

New York, Jan. 11 - Rock-Tenn Co. is planning on getting a new $1 billion credit facility and issuing $400 million of unsecured senior notes to fund the acquisition of Southern Container Corp. company officials said in a conference call Friday.

Wachovia Bank, Bank of America and SunTrust Bank are the lead banks on the new debt financing.

The credit facility consists of a $450 million revolver and a $550 million term loan.

Backing the notes is a bridge loan commitment.

When asked about pricing on the new bank and bond debt, company officials said that there is no price indication at this time and that it will ultimately be dependent on market conditions.

Security for the credit facility is certain assets of Rock-Tenn and Southern Container.

Rock-Tenn's existing senior notes will share the collateral under the terms of the indenture dated July 31, 1995.

In addition to funding the acquisition, proceeds from the debt will be used to refinance the company's existing credit facilities and provide in excess of $200 million of undrawn capacity.

At the close, $132.4 million is expected to be drawn under the revolver.

Total net debt will be around $1.8 billion, debt to capitalization will be around 75.7% and pro forma net debt to trailing 52 weeks EBITDA will be around 4.1 times.

The company has a debt reduction target of 3.0 times by Sept. 30, 2010, officials added in the call.

Rock-Tenn is buying Southern Container, a Hauppauge, N.Y., privately-held containerboard manufacturing and corrugated packaging business, for $851 million in cash. The purchase price, including debt of Southern Container, represents a multiple of about 6.9 times Southern Container's pro forma EBITDA for the 52 week period ended Sept. 8.

Closing is expected in late March, subject to Hart-Scott-Rodino review and other customary closing conditions.

Rock-Tenn is a Norcross, Ga., manufacturer of packaging products, merchandising displays and bleached and recycled paperboard.

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