Rock-Tenn reveals pricing guidance as $1 billion credit facility launches

By Sara Rosenberg

New York, Jan. 30 - Rock-Tenn Co. announced price talk on its $1 billion credit facility (Ba2) at the Wednesday morning bank meeting that took place to launch the deal, according to a market source.

The $450 million five-year revolver and the $350 million five-year term loan A are both being talked at Libor plus 250 basis points and are being offered with an upfront fee of 1 bps per $1 million commitment, the source said.

The $200 million six-year term loan B is being guided at pricing of Libor plus 275 bps to 300 bps, including spread and original issue discount, the source continued.

The term loan B was just recently added to the transaction as a result of reverse inquiry from institutional accounts. Originally, the deal was supposed to be all pro rata, with the term loan A carrying a size of $550 million.

Wachovia Bank, Bank of America and SunTrust Bank are the lead banks on the deal.

Proceeds from the credit facility, along with $400 million of unsecured senior notes, will be used to fund the acquisition of Southern Container Corp., 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.

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

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.

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.

Corporate ratings are Ba2/BB+.

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

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