ACCO commitment includes $845 million facility, $270 million bridge

By Sara Rosenberg

New York, Jan. 3 - Acco Brands Corp. has received a commitment for an $845 million senior secured credit facility and a $270 million senior unsecured bridge loan in connection with its merger with MeadWestvaco's office supplies business, according to an S-4 filed with the Securities and Exchange Commission on Tuesday.

Barclays Capital Inc., Bank of America Merrill Lynch and Bank of Montreal are the lead banks on the debt.

The credit facility consists of a $480 million seven-year term loan, a $190 million seven-year term loan at Spinco and a $175 million five-year multicurrency asset-based revolver.

Pricing on the term loans is expected at Libor plus 475 basis points with a 1.25% Libor floor, and pricing on the revolver is expected at Libor plus 200 bps initially. The revolver spread would be able to range from Libor plus 175 bps to 225 bps based on excess availability.

The term loans include 101 soft call protection for one year.

Financial covenants under the term loans are minimum interest coverage and maximum leverage ratios. The company will be required to comply with a minimum fixed-charge coverage ratio under the revolver during periods that availability is less than certain availability minimums.

There is a $200 million accordion feature under the $480 million term loan and a $50 million accordion feature under the revolver.

Regarding the bridge loan, that is expected to be replaced with Spinco securities.

Proceeds will be used to repay ACCO's 10 5/8% senior secured notes and to fund the merger as well as for ongoing working capital requirements.

As an alternative to entering into the new revolver, ACCO may amend its existing ABL revolver.

Additionally, ACCO said in the filing that it expects to refinance its outstanding notes and fund the merger with an alternate combined company financing structure, which would result in a lower interest expense than the structure outlined.

However, at this time, the terms of the combined company financing structure are under negotiation and no definitive commitments have been obtained.

The merger with the Consumer & Office Products business is valued at roughly $860 million, and at completion, MeadWestvaco shareholders will own 50.5% of the combined company.

Under the terms of the agreement, MeadWestvaco will establish a separate entity to hold the consumer & office products business, the shares of which will be distributed to MeadWestvaco shareholders in a tax-free transaction in return for a $460 million dividend to MeadWestvaco from the new entity. Immediately after the spin-off and distribution, the newly formed company will merge with a subsidiary of ACCO.

Closing is expected in the first half of this year, subject to approval by ACCO shareholders and the satisfaction of customary closing conditions and regulatory approvals, including a ruling from the U.S. Internal Revenue Service on the tax-free nature of the transaction.

Acco Brands is a Lincolnshire, Ill.-based office supply manufacturer.

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