Koch Forest Products reveals $11 billion credit facility commitment, retail launch expected in 2006

By Sara Rosenberg

New York, Nov. 17 - Koch Forest Products Inc. announced particulars on the financing for its tender offer for all Georgia-Pacific Corp. shares, which includes a commitment for an $11 billion senior secured credit facility, according to a SC TO-T filed with the Securities and Exchange Commission Thursday.

Citigroup is the lead bank on the credit facility that is expected to be launched to retail investors in 2006, a market source said.

The facility consists of a $2 billion five-year term loan A, a $1.5 billion five-year revolver, a $5 billion seven-year term loan B and a $2.5 billion eight-year second-lien term loan.

The term loan A and the revolver will carry an interest rate that will range from Libor plus 150 to 225 basis points based on the ratio of total debt to consolidated EBITDA. The term loan B will carry an interest rate of Libor plus 225 bps. And, the second-lien loan will carry an interest rate of Libor plus 350 bps, the filing said.

Amortization on the term loan A is 5% in year one, 10% in years two and three, 20% in year four and 55% in year five. Amortization on the term loan B is 27 equal quarterly installments of 0.25%, with the balance due at maturity.

Koch Forest Products Holding has also received a commitment for bridge financing of a $6.4 billion senior secured term loan at Libor plus 250 bps to provide short-term financing for the tender offer.

Proceeds from the term loan A, term loan B and second-lien loan will be used to repay the bridge loan and to refinance, repurchase or redeem outstanding debt securities of Georgia-Pacific and its subsidiaries and to refinance Georgia-Pacific's existing credit facility.

Revolver borrowings will be available for general corporate purposes.

Also as part of the merger financing package, Koch Industries Inc. will make an equity contribution of $7.1 billion that will be funded through a combination of cash on hand and a new $1.5 billion three-year senior unsecured revolving credit facility with an interest rate ranging from Libor plus 25 to 35 bps.

Under the merger agreement, Koch has offered to pay $48.00 per Georgia-Pacific share for an equity value of $13.2 billion and a total enterprise value of $21 billion, including all Georgia-Pacific debt.

Assuming completion of the merger, Georgia-Pacific will be operated as a privately held, wholly owned subsidiary of Koch Industries, will continue to do business under the Georgia-Pacific name and will continue to be based in Atlanta.

Koch Forest Products is a wholly owned subsidiary of Koch Industries Inc. that was formed for the purpose of making this tender offer. Georgia-Pacific is a manufacturer and marketer of tissue, packaging, paper, building products and related chemicals. Koch Industries is a Wichita, Kan., owner of a diverse group of companies engaged in trading, operations and investments.

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