KapStone plans $600 million add-on term loan for Victory purchase

By Sara Rosenberg

New York, May 5 – KapStone Paper and Packaging Corp. expects to get a $600 million add-on term loan to help fund its acquisition of Victory Packaging/Golden State Container, according to an 8-K filed with the Securities and Exchange Commission on Tuesday.

Bank of America Merrill Lynch, Barclays and Wells Fargo Securities LLC are the lead banks on the debt.

Other funds for the transaction are anticipated to come from $31 million in revolver borrowings.

The average blended cash interest rate is expected to be 2%.

Under the agreement, Victory is being purchased for $615 million in cash, subject to post-closing adjustments. In addition, two contingent earnouts totaling $45 million could be payable two and a half to four years after the close and are based on the continued strong growth of the business.

Debt to adjusted EBITDA with synergies is expected to be 3.3 times, the filing added.

The combined company is expected to deliver substantial free cash flow in the first year, allowing for quick deleveraging.

Closing is targeted for this quarter, subject to customary conditions, including regulatory review.

KapStone is a Northbrook, Ill.-based producer of containerboard and corrugated packaging products and a kraft paper producer. Victory is a Houston-based distributor of packaging.

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