Rock-Tenn readies launch of $3.7 billion credit facility for Thursday

By Sara Rosenberg

New York, Feb. 18 - Rock-Tenn Co. has scheduled a bank meeting for Thursday to launch its proposed $3.7 billion senior credit facility, according to a market source.

A senior managing agent round has already been taking place, and that process was expected to wrap up by the end of the day on Friday.

Wells Fargo, SunTrust, Rabobank, Bank of America Merrill Lynch and J.P. Morgan are the lead banks on the deal, with Wells Fargo the left lead.

The facility consists of a $1.2 billion five-year revolver, a $1.25 billion five-year term loan A and a $1.25 billion six-year term loan B.

The revolver and term loan A are being talked at Libor plus 200 basis points, and while talk is not yet out on the B loan, all in pricing is expected to come in the sub-4% area, the source said.

Proceeds will be used to help fund the acquisition of Smurfit-Stone Container Corp. in a transaction valued at $3.5 billion, consisting of $1.8 billion of cash and the issuance of 30.9 million shares of common stock.

Specifically, Smurfit-Stone shareholders will receive 0.30605 shares of Rock-Tenn common stock and $17.50 in cash per share.

Following the acquisition, Rock-Tenn shareholders will own about 56% and Smurfit-Stone shareholders will own 44% of the combined company.

In addition to the equity consideration, Rock-Tenn will assume Smurfit-Stone's net debt and pension liabilities. As of Dec. 31, Smurfit-Stone's net debt was $700 million and its pension liabilities were $1.1 billion.

The new credit facility will be used to refinance Smurfit-Stone debt as well as some Rock-Tenn debt, on top of helping to fund the cash purchase amount.

Of the total revolver amount, $632 million is expected to be drawn at close.

Pro forma leverage will be 2.76 times.

Closing on the transaction is expected in the second quarter, subject to customary conditions, regulatory approvals, and approval by both Rock-Tenn and Smurfit-Stone stockholders.

Rock-Tenn is a Norcross, Ga.-based manufacturer of paperboard, containerboard and consumer and corrugated packaging. Smurfit-Stone is a Chicago-based containerboard and corrugated packaging producer, and a paper recycler.

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