Greif continues to pay down debt, plans loan draw to repay 2021 notes

By Devika Patel

Knoxville, Tenn., Dec. 10 – Greif, Inc. plans to pay down €200 million of maturing notes next year using the funds from a new delayed draw term loan.

As of Oct. 31, the company had $538.1 million of available borrowing capacity under its $800 million revolving credit facility.

Subsequent to Oct. 31, the company entered into a delayed draw term loan with the intent to use the proceeds to pay down the company's €200 million 7 3/8%% senior notes at maturity in July 2021.

“Our capital allocation priorities are unchanged and include reinvesting in our business, paying down debt and returning cash to our shareholders,” executive vice president and chief financial officer Larry A. Hilsheimer said on the company’s fourth quarter and year ended Oct. 31 earnings conference call on Thursday.

“At year-end, our balance sheet is in great shape with roughly $538 million of available borrowing capacity on our revolver.

“Other than the €200 million senior notes due in July, we have no other sizable maturities due until fiscal 2024.

“As we continue to generate cash, pay down debt and reduce leverage towards our target range of 2x to 2.5x over time, we will shift the enterprise value to the benefit of our equity holders,” Hilsheimer said.

The company has reduced its debt.

“We’ve emphasized our focus on generating free cash flow and paying down debt in previous calls and that’s exactly what we did in the quarter,” Hilsheimer said.

“Fourth quarter adjusted free cash flow was outstanding and rose by roughly $24 million versus the prior year.

“We expect lower year over year interest expense [in 2021] as a result of lower overall debt levels and the favorable rates we locked on our recently announced term loan A3.

“We plan to draw on the term loan in July of 2021 to finance our existing 7 3/8% €200 million senior notes, which mature that month,” Hilsheimer said.

Management expects debt levels to rise next year, due to Greif’s normal seasonality pattern.

“We generally will increase our debt loads,” Hilsheimer said.

“Our first quarter tends to be our weakest quarter of the year, so we end up going more into our lines.

“We won’t really start to see that turn back around till our third quarter, fourth quarter.

“That’s just our normal seasonality pattern, where the debt’s higher in the first part of the year, runs up, comes back down,” Hilsheimer said.

Overall, the company’s executives are pleased with what they accomplished last year.

“We made great progress towards our financial priorities,” president and chief executive officer Peter G. Watson said on the call.

“We delivered exceptional adjusted free cash flow of roughly $346 million.

“We reduced net debt by approximately $294 million in total debt and we returned more than $104 million in dividends to our shareholders,” Watson said.

Adjusted free cash flow increased by $78.4 million in fiscal 2020 to $346.2 million, compared to $267.8 million for the year ended Oct. 31, 2019.

Other than the €200 million senior notes, the company has no other sizable debt maturities due until 2024.

Cash and cash equivalents were $105.9 million as of Oct. 31, 2020, compared to $77.3 million as of Oct. 31, 2019.

Long-term debt was $2,335,500,000 as of Oct. 31, 2020, compared to $2,659,000,000 as of Oct. 31, 2019.

In late November, Greif and certain subsidiaries including Greif Packaging LLC priced a new $225 million delayed-draw term loan A-3 due 2026 led by CoBank, ACB.

The incremental term loan bears interest at Libor plus a margin ranging from 150 basis points to 275 bps, depending on leverage ratio

There is a ticking fee of 35 bps on the average daily undrawn amount.

The incremental term loan must be funded in a single draw on a business day on or before July 15, 2021.

The incremental term A-3 loan matures on July 15, 2026, with quarterly installments of principal payable on the last day of each fiscal quarter of the company commencing with the first date to occur after the funding date.

The company plans to draw on the term loan to refinance its €200 million 7 3/8% senior notes when they mature in July 2021.

Greif added the incremental term loan under its senior secured credit agreement, which also provides for a $1,275,000 secured term A-1 loan and a $400 million secured term A-2 loan.

JPMorgan Chase Bank, NA is the administrative agent.

Greif is a Delaware, Ohio-based industrial packaging company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.