J.P. Morgan Chase has been selected as the principal lead arranger for the proposed credit facility backing Domtar Inc.'s, $1.65 billion acquisition of four paper mills from Georgia Pacific Corp. that will likely lead to a $750 million term loan. Jean Sebastien Van Brugghe, manager of investor relations for Montreal-based Domtar, said a bridge facility of $1.65 billion will be put in place, in order to demonstrate that Domtar has the financing to fund the acquisition, and enable Georgia Pacific to pay down their own debts.
Approximately $900 million of the credit will be refinanced through an equity offering and the issuance of senior debt after the deal closes in the third quarter, Van Brugghe added. The balance of the credit will shift to a $750 million term loan, which J.P. Morgan Chase will syndicate. At least half of the $900 million will be bonds. This capital structure will extend maturity and reduce leverage, Van Brugghe said.
A spokesman for Domtar said that the details of the loan are still to be finalized. Banks expected to participate include Bank of Novia Scotia and National Bank of Canada, according to sources. The spokesman declined comment on other potential banks. Officials at Scotia and National Bank of Canada did not return calls.
Domtar will benefit from massive investor appetite for an investment grade BBB- rated issue, said Van Brugghe. The company has a history of reducing leverage following an acquisition and growing prudently, he added. Domtar is the largest Canadian printing and writing paper producer, also managing close to 36 million acres of forest land in Canada and in the U.S.