Silgan Holdings facility sized at $4 billion, notes at $400 million

By Sara Rosenberg

New York, April 18 - Silgan Holdings Inc.'s proposed senior secured credit facility is sized at $4 billion and its senior subordinated unsecured notes offering is sized at $400 million notes, according to an 8-K filed with the Securities and Exchange Commission on Monday.

The facility consists of an $800 million five-year revolver, a $900 million six-year term loan A and a $2.3 billion seven-year term loan B.

The term loan can be replaced, in part, by one or more senior note facilities.

Pricing on the revolver and the term loan A is expected to be Libor plus 250 basis points, and pricing on the term loan B is expected to be Libor plus 325 bps with a 1% Libor floor.

The revolver has a 50 bps unused fee and the term loan B has 101 soft call protection for one year.

There is a $750 million accordion feature under the credit agreement.

Covenants include interest coverage and total leverage ratios.

The subordinated notes are backed by a $400 million bridge loan priced at Libor plus 625 bps with a 1.5% Libor floor. The spread will increase by 50 bps at the end of each three-month period.

Bank of America Merrill Lynch is the lead bank on the financing.

Proceeds from the new debt will be used to help fund the acquisition of Graham Packaging Co. Inc.

The company also has the ability to issue $500 million of senior unsecured notes if it has to repurchase any of Graham Packaging's 8.25% senior unsecured notes.

The senior notes are backed by a $500 million bridge loan that is priced at Libor plus 550 bps, increasing by 50 bps at the end of each three-month period. There is a 1.5% Libor floor.

Following the acquisition, Silgan expects to generate on a pro forma basis about $500 million of free cash flow, or roughly $5 per share, in the first full year of operations.

Given the free cash flow generation of the combined business, the company expects leverage to be comfortably back in the middle of the 2½ times to 3½ times context in two to three years.

Under the purchase agreement, Graham shareholders will receive 0.402 shares of Silgan common stock and $4.75 in cash per share, representing a total enterprise value, including net debt, of $4.1 billion.

Included in the transaction costs is a cash payment at closing of $245 million due to contractual change-in-control provisions in Graham's income tax receivable agreements with Blackstone Capital Partners III LP and the Graham family.

The combined company has annual sales of over $6.2 billion and pro forma 2010 EBITDA of $1.1 billion, including $50 million of synergies.

Closing is expected in the third quarter, subject to the approval of the transaction by Silgan's shareholders and Graham's shareholders, receipt of applicable regulatory approvals and the satisfaction of customary conditions.

Silgan is a Stamford, Conn.-based manufacturer of consumer goods packaging products. Graham is a York, Pa.-based supplier of plastic containers.

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