Riverwood International could be forced to shelve its planned bank deal as the initial public offering that is part of the package is in danger of being struck down by the volatile equity markets. Riverwood's new senior debt deal is contingent on the IPO, said spokesman Steve Meyers. J.P. Morgan and Deutsche Bank were reportedly preparing to launch the $250 million term loan for Atlanta-based Riverwood sometime this month, but bankers and investors believe the deal might not go ahead due to the equity market.
At this point the IPO for the paperboard packaging company has not been cancelled, Meyers stated, declining further comment on prospects for the offer, citing the firm's quiet period. The proceeds of the anticipated $350 million IPO and the new financing were to back the offer to purchase all Riverwood's outstanding 107/ 8% senior subordinated notes due 2007. The tender offer was scheduled to expire on Aug. 2, but has it been pushed back now to Sept. 6 to accommodate the market conditions, Meyers added. Meyers declined to comment on the company's plans if the deal does not come through.
The mammoth slides and sudden peaks in equities has already killed or postponed a number of bank deals tied to initial public offerings, including rival Constar International. Cinemark USA, Graham Packaging and Kinetic Systems have also shelved offerings last month, pulling almost $1 billion from the "B" forward calendar market as a result. "Compared to other months, withdrawals of IPOs in July picked up," said Kyle Huske, market analyst with IPO.com. "When the market turned foul, firms postponed," she noted, adding the forward calendar is pretty bare.
The equity markets are not the only reason for a massive cancellation of bank deals. Mobile Storage and Casella Waste postponed deals. "While the loan market remains open, the recent volatility in the other capital markets has definitely bled into our market," said Lucine Kirchhoff, managing director and head of Bank of America syndicated finance research. "Investors are very focused on credit quality and appropriate compensation for transaction risk. This has been bourne out by several recent deals that have either flexed up or had covenant packages tightened."
