ACCO Brands looking to reduce debt by up to $40 million plus sale proceeds in 2009

By Jennifer Lanning Drey

Portland, Ore., Feb. 27 - ACCO Brands Corp. plans to reduce debt in 2009 by $30 million to $40 million, not including proceeds from the sale of its commercial print finishing business, which will also be applied toward the debt balance, Neal Fenwick, chief financial officer of ACCO, said Friday.

The company had $708.7 million of total debt at Dec. 31 after deleveraging by $63 million in the fourth quarter, Fenwick reported during the company's fourth-quarter earnings conference call.

The fourth-quarter debt reduction included the purchase of $36 million principal amount of senior fixed-rate notes for $19 million.

"We will aggressively manage cash and continue to deleverage our balance sheet. We believe that focusing on cash is critical in this uncertain environment," Robert Keller, chief executive officer of ACCO, said during the call.

ACCO has $26 million in principal due in the second half of the year and does not anticipate having any liquidity issues that will prevent it from making its obligations.

Plans to generate cash

ACCO's inventory balance was about $60 million higher than expected at year-end, and ACCO believes the inventory will provide a strong source of cash as it is worked down, Fenwick said.

In addition, the company has taken actions to drive an additional $30 million of cost savings in 2009, above the $45 million to $55 million of cost savings already announced.

"We believe the roughly $80 million of annual savings provides adequate cushion on our bank covenant and ensures that we have access to liquidity.

ACCO covenant-related leverage was 4.5 times at year-end, compared with a maximum permitted leverage of 5.5 times. In September, the maximum allowed leverage will step down to 5.25 times.

"We remain in compliance with our covenants and expect to be going forward," Fenwick said.

ACCO's net sales declined by 30% in the fourth quarter to $353.4 million. The loss from continuing operations for the period was $240.1 million, compared to income of $20.5 million in the comparable prior-year period.

ACCO is a Lincolnshire, Ill.-based designer, developer, manufacturer and marketer of branded office products.

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