Graham units foresee no further extension in tender for 9 7/8% notes

By Jennifer Chiou

New York, Aug. 19 - Graham Packaging Co. Inc. subsidiaries Graham Packaging Co., LP and GPC Capital Corp. I said that unless a significant amount of additional tenders comes in for their 9 7/8% senior subordinated notes due 2014, the companies do not intend to extend the offer for those securities.

As announced on Aug. 4, the subsidiaries did not receive the consents needed to amend their 8¼% senior notes due 2017 and 8¼% senior notes due 2018 and did not purchase any tendered 8¼% notes.

If the expiration time is not extended, the issuers said in a news release that they plan to waive the merger transaction condition in the offer and accept for purchase the validly tendered 9 7/8% notes.

Also, the issuers said that they will fund the purchase of the notes with proceeds of a new senior subordinated note to be issued to Reynolds Group Holdings Ltd. or one of its affiliates in a principal amount equal to the amount of notes being purchased if the offer is not extended. Accrued interest will be paid out of cash on hand.

Tender offers and consent solicitations for the 8¼% notes and the 9 7/8% notes began on July 7. The offer for the 8¼% notes expired at 8 a.m. ET on Aug. 4, and the offer deadline for the 9 7/8% notes was been extended to 5 p.m. ET on Aug. 19 at that time.

As of 8 a.m. ET on Aug. 4, holders had tendered $18,155,000 of the 9 7/8% notes.

The proposed amendments would allow the issuers to skip a change-of-control offer for the notes after it is acquired by Reynolds Group Holdings.

As reported, some holders of the 8¼% notes objected to the proposed financing structure for the acquisition. According to Reynolds, the noteholders claim that some covenants in the note indentures will be violated and that they are entitled to more than the 101% of par that will be offered in the change-of-control offers.

"These noteholders have resorted to various means in an attempt to receive additional consideration, including threats of litigation. We believe that their threatened claims have no merit and, if actually asserted, we will contest them vigorously," Reynolds Group said in a prior news release.

On July 7, Reynolds said it planned to finance the acquisition with roughly $2 billion of senior secured term loans, $1.5 billion of senior secured debt, $500 million of senior unsecured debt and available cash.

On July 25, the company announced that it expects to increase the senior unsecured portion by $500 million and that the increase will be used to repurchase any of Graham's senior notes that remain outstanding following the acquisition at 101% of par.

Consent solicitation

The consent deadline was 5 p.m. ET on July 19 for the 9 7/8% notes and 5 p.m. ET on July 20 for the 8¼% notes.

Separate actions were required to tender notes and to deliver consents; a tender of notes does not constitute a delivery of consents. Noteholders who wished to deliver consent without tendering their notes had to do so by the consent deadline in order to receive the consent fee.

The payment for notes tendered with consents by the applicable consent deadline is $1,020 per $1,000 principal amount of notes. For the 9 7/8% notes, this payment includes a base offer amount of $995, an early tender premium of $10.00 and a consent fee of $15.00. For the 8¼% notes, this payment would have included a base offer amount of $985, an early tender premium of $10 and a consent fee of $25.

Holders who tendered their 9 7/8% notes after the consent deadline will receive only the base offer amount. The companies will also pay accrued interest up to but excluding the settlement date.

The composition of the payment for the 8¼% notes was amended on July 18. Before the change, the base offer amount was $995, the early tender premium was $10 and the consent fee was $15. The total amount to be paid for notes tendered by the consent deadline, $1,020, was not changed.

Graham Packaging said that the purpose of the tender offers and consent solicitations is to offer noteholders an opportunity to receive a premium to the payment that they would receive if they were to tender their notes in a change-of-control offer and to provide Reynolds Group and its affiliates with "permitted holder" status under the indentures governing the notes that is substantially similar to the status that they would have if a change-of-control offer were consummated.

The offers and consent solicitations were originally conditioned on the consummation of the merger and the receipt of consents from the holders of at least a majority of each series of notes.

The dealer manager is Credit Suisse Securities (USA) LLC (800 820-1653 or 212 538-2147). The information agent is D.F. King & Co., Inc., (800 714-3312 or 212 269-5550).

Graham Packaging is a York, Pa.-based designer, manufacturer and seller of technology-based, customized blow-molded plastic containers. Reynolds Group is an Auckland, New Zealand-based manufacturer and supplier of consumer food and beverage packaging and storage products.

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