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Hart’s Reynolds pays more to fund Graham Packaging purchase

Hart’s Reynolds pays more to fund purchase of Graham Packaging

By Paul McBeth

Aug. 10 (BusinessDesk) – Graeme Hart’s Reynolds Group Holdings’ funding costs have increased for its latest US$2.5 billion of bonds, which were sold to help pay for Graham Packaging Co., the latest addition to his packaging empire.

Reynolds sold US$1.5 billion of senior secured notes due 2019 at 7.875% and US$1 billion of senior notes due 2019 paying 9.875% annual interest. That’s 573.5 basis points and 773.5 basis points respectively above the U.S. eight-year swap rate of 2.14%.

The latest sale is at higher rates than Reynolds’ last debt issue this year, of US$2 billion of 10-year bonds at 6.875% and 8.25% in a private placement to refinance the packaging unit’s debt.

Reynolds also secured an amendment to its existing credit facilities where its lenders committed to provide incremental term loans of US$2 billion.

The new debt will be used to finance Reynolds’ purchase of rival Graham Packaging which will bring Hart close to being the biggest packaging company in the world. Tetra Laval Group’s annual revenue is 9.99 billion euros (US$14.36 billion) and Hart’s sales are set to rise to US$13.26 billion, based on pro-forma figures released by Reynolds.

The mounting debt on Hart’s packaging group has made rating agencies S&P and Moody’s Investors Group nervous about its ability to service interest payments.

Last month, both agencies voiced their unease with the level of debt in their latest assessments of the group, even as they recognised Hart’s ability to keep a steady cash flow.


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