Graham Packaging has completed a $820 million line of credit, eight months after a planned bank deal was nixed. Deutsche Bank and Salomon Smith Barney lead the facility that reworks the company's existing senior bank debt at a higher rate of interest. The spread over LIBOR increased by 100 basis points on the term loan and by 225 basis points on the revolver. The upward price flex was market driven, said Mark Leiden, director of investor relations for Graham, explaining that while the bank market was still strong, spreads have gone up since the company's previous deal. "The original agreement started in February of '98, during a pretty attractive time," he said.
Graham's new credit consists of a $570 million, seven-year loan, a $100 million seven-year term loan, and a $150 million, five-year revolver. "We don't plan to tap into the revolver," Leiden noted. The two tranches of the term loan are both priced at 41/4% over LIBOR and the revolver is priced at LIBOR plus 33/4%. The new deal replaces the company's $570 million term loan, which carried pricing that ranged between 21/2% - 31/4%, and its $155 million, five-year revolver. The revolver was originally priced at 11/2%. There was also a $100 million growth capital revolver.
Graham's June proposal for recapitalization called for a new $700 million credit facility, a $100 million offering of secured senior notes and an initial public offering of $250 million. Though the plan never came to fruition, the company has not abandoned its equity plans. The proposed $100 million offering of secured senior notes was pulled from the market, but the IPO is still in registration with theSecurities and Exchange Commission, Leiden said, citing volatile market conditions as the reason for the delay. "The only change is the equity market started to go south right when we were on the road," he explained, making reference to when the stock prices fell during a road show last July.
Leiden commented that the company is not working within a specific time frame and will make the offering when the opportunity arises. He said the company plans to use the IPO to pay down debt.