Moore Wallace will likely try to refinance its bank facility upon completion of its $2.8 billion all-stock merger with RR Donnelley, noted Michael Kraus, senior v.p. of mergers and acquisitions at Moore Wallace. He said it is too early to say whether the company would use bank debt or a bond deal, adding the company would choose whichever option offered the best value. The company is waiting for the merger to work out. "People have a right to put the bonds at 101, so we'll have to see how that plays out," Kraus said.
Donnelley will assume approximately $900 million of Moore Wallace's debt. Moore Wallace has $498.75 million outstanding on its "B" loan, an undrawn $350 million revolver and $403 million principal amount of senior unsecured notes. Citibank was recently in the market repricing Moore Wallace's bank debt (LMW, 10/27). Donnelley's investment-grade bank lines are led by Bank One and Wachovia Securities. Kraus said it is too early to say which banks would lead a credit if the company decides to go that way.
Moody's Investors Service has placed Moore Wallace's ratings on review for possible upgrade following the announcement of the merger agreement. Donnelley's A2 senior unsecured ratings were also placed on review for possible downgrade. Moody's estimates the combined company will have approximately 1.9 times debt-to-EBITDA and 7.5 times debt to free cash flow.