Koch Forest targets Jan. 10 launch for $11 billion credit facility

By Sara Rosenberg

New York, Dec. 16 - Koch Forest Products Inc. is expecting to hold a bank meeting on Jan. 10 to launch its proposed $11 billion senior secured credit facility to retail investors, according to a market source.

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 are expected to carry an initial interest rate of Libor plus 225 basis points, but pricing can range from Libor plus 150 to 225 bps based on leverage. The term loan B will carry an interest rate of Libor plus 225 bps. The second-lien loan will carry an interest rate of Libor plus 350 bps, according to commitment letters filed with the Securities and Exchange Commission.

Citigroup was the provider of the original loan commitment in mid-November, but since then more banks have signed on the deal in lead/agent capacities.

Citigroup is the administrative agent, joint bookrunner and joint lead arranger on the entire facility; Bank of America is syndication agent, joint bookrunner and joint lead arranger on the revolver and term loan A; Deutsche Bank is syndication agent, joint bookrunner and joint lead arranger on the term loan B; and JPMorgan is syndication agent, joint bookrunner and joint lead arranger on the second-lien loan.

Amortization on the term loan A is 5% in year one, 10% in years two and year 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.

Proceeds from the term loan A, term loan B and second-lien loan will be used to repay a $6.356 billion bridge loan that was used to fund the tender offer for all of Georgia-Pacific Corp.'s shares, to refinance, repurchase or redeem certain 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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