J.P. Morgan and Deutsche Bank last week opened the books on a $2.322 billion credit for Smurfit-Stone Container Corp. that is expected to capture the attention of most of the institutional investor base. "That's a big liquid deal that everyone will look at," one buysider noted. Investors are offered three institutional tranches as a strip, one banker noted. They are being asked to commit pro rata to a $1 billion "B" loan, $300 million "C" loan and $122 million synthetic letter of credit facility, he added.
The credit is refinancing existing debt but is being syndicated concurrently with the merger of the two operating companies Jefferson Smurfit Corp. and Stone Container Corp. The operating companies have had side-by-side capital structures since 1998 when Jefferson Smurfit Group merged with Stone Container, the banker noted. The company left two separate debt structures in place largely because it would have cost them a lot to tender for bonds but now the company is consolidating and refinancing, he added.
The credit also includes a $900 million revolver. Bank of America and Société Générale have signed on as agents, committing $85 million to the revolver. The entire credit is being offered at LIBOR plus 2 1/4%. The "C" loan will be placed in Canada and has historically been available to the Canadian subsidiary, the banker noted. The six-year tranche is supposed to be short term and be paid off with proceeds of timber sales, a buysider noted. The credit launched last Tuesday at a bank meeting in New York. Charles Hinrichs, the company's cfo, referred calls to a J.P. Morgan banker, who declined comment. Deutsche Bank officials did not return calls.