The outstanding debt for the new Graphic Packaging Corp., which was recently formed from a merger between Graphic Packaging International Corp. and Riverwood Holding, provides the combined companies with interest rate savings of about $30 million over what they had been paying separately, said Bruce Kirk, Graphic's v.p. of investor relations. The debt backing the merger includes a new $1.6 billion credit, $425 million of 81/2% senior notes and $425 million of 91/2% senior subordinated notes.
"The driver for the company is debt reduction from its excess cash flow, and the bank lines give an option relative to the fixed-rate debt to be diminished," said Kirk, about why the company decided to tap the loan market for the transaction. The new credit comprises a $325 million revolver, of which only roughly $60 million is currently drawn, and $1.275 billion in "A" and "B" term loans. Both term loans are priced at LIBOR plus 23/4%. Riverwood's and Graphic Packaging's existing senior secured credit facilities were repaid in conjunction with the merger.
J.P. Morgan, Deutsche Bank, Goldman Sachs, Morgan Stanley, Citigroup and Credit Suisse First Boston arranged the new loan. Goldman was on the left for the transaction, said Kirk. "These are the gorillas and the goliaths of the debt markets," he said on why the banks were chosen. Goldman Sachs and CSFB were also financial advisors on the transaction.