Riverwood Holdings/Graphic Packaging credit facility slated to launch first week of June

By Sara Rosenberg

New York, May 9 -The retail launch for Riverwood Holdings Inc.'s credit facility is now expected to take place during the first week of June, mainly due to the long process of gaining the regulatory approvals needed for a merger of this size, according to a source close to the deal.

The company is anticipated to obtain a $1.5 billion plus financing package that will include both bank debt and high-yield bonds in order to help back the merger of Riverwood and Graphic Packaging International Corp.

Specific details on the financing package are not being revealed at this time since the launch date is still a while off.

Although the merger was announced towards the end of March, the financing is not launching for a while since there is a "pretty big regulatory process" to go through in order for the merger to get done, the source said.

Under the agreement, Riverwood and Graphic Packaging will merge in a stock transaction with an enterprise value of approximately $3 billion. The combined company will have 2002 pro forma revenues of about $2.3 billion and EBITDA in excess of $400 million. Management has identified broad-based operating synergies of $55 million per year, which are expected to be fully realized in the third year after closing. The new entity is projected to generate substantial cash flow to reduce debt.

JPMorgan, Deutsche Bank, Goldman Sachs and Morgan Stanley are four equal underwriter leads on the financing. Citibank and Credit Suisse First Boston are co-leads.

Riverwood is an Atlanta provider of paperboard packaging solutions to multinational beverage and consumer products companies. Graphic Packaging is a Golden, Colo. folding carton packaging supplier to the food, beverage and other consumable products markets.

Following up, it is no surprise that there were already over a billion in commitments in by Friday for Owens-Illinois Inc.'s $750 million term loan B, since the tranche was subscribed by the end of Wednesday's launch date.

As for the pro rata, which always takes longer to get done, the syndicate has gotten "good indications" from a handful of potential lenders, a syndicate source told Prospect News Friday.

The $1.9 billion credit facility consists of a $650 million four-year revolver with an interest rate of Libor plus 325 basis points, a $500 million four-year term loan A with an interest rate of Libor plus 325 basis points and a $750 million five-year term loan B with an interest rate of Libor plus 350 basis points.

The upfront fee on the B loan is 25 basis points. On the pro rata, there is 100 basis points upfront fee for a commitment of $25 million and a 75 basis points upfront fee for a commitment of $15 million, according to a syndicate source.

Some things working in favor of the deal are the existing lender group and the company's success in dealing with the asbestos issue.

Deutsche Bank and Bank of America are the lead banks on the Toledo, Ohio manufacturer of packaging products' refinancing deal.

Meanwhile, in the secondary Calpine Corp.'s bank debt was basically unchanged in what was described by many as very quiet Friday bank loan market despite news of a new two-year agreement with Brazos Electric Power Cooperative Inc. The paper was quoted by one trader at 96½ bid, 97½ offered and by a second trader at 96¾ bid, 97¼ offered.

On Friday, the San Jose, Calif. power company announced that it signed a two-year agreement to provide up to 300 megawatts of power to Brazos, with power deliveries beginning during the first quarter of 2004. Calpine will receive energy payments based on varying peak and off-peak fixed heat rates, plus a fixed-capacity payment.

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