Sappi to raise $800m in bond issue

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PAPER & PULP

Sappi to raise $800m in bond issue

27th July 2009

By: Chanel de Bruyn

Creamer Media Senior Deputy Editor Online

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Paper and pulp producer Sappi announced on Monday that it had successfully priced its bond offering to raise about $800-million of new senior secured notes, due in 2014.

This followed a July 20 announcement that it would offer $500-million worth of senior secured notes, which would be issued by Austrian liability firm PE Paper Escrow, as one component of a refinancing plan to improve its debt maturity profile and strengthen its balance sheet.

The new notes were in two tranches, the first a tranche of €350-million and the second $300-million, the company said in a statement to shareholders.

The tranches were priced at issue prices of about 95%, with coupons of 11,75% and 12% and yields of 13,125% and 13,375%, respectively.

The proceeds of the offering would be immediately placed into escrow by the issuer, only to be released from escrow upon the fulfilment of a number of conditions, including if Sappi refinanced its existing revolving credit facility and establish a new revolving credit facility.

Further, its existing Oesterreichische Kontrollbank (OeKB) term loan facility would also have to be replaced with a new OeKB term loan facility, while other debt facilities would have to be amended.

As part of the refinancing, Sappi would enter into a new revolving credit facility in an amount of €250-million, which could be increased up to €400-million, and a new OeKB term loan facility in an amount of up to €400-million, it said earlier in July.

Sappi would use the proceeds to extend the maturity of debt by repaying shorter-term debt, it said.

The producer had an arrangement to repurchase all or part of the €220-million vendor loan notes (VLNs) issued to M-real in connection with the acquisition of its coated graphic paper business, at a discount of between 8,5% and 13,5%.

“We are pleased with the outcome of the bond. The refinancings will take care of our significant debt maturities for the next three years. The repayment of all or part of the VLNs would also extend our debt maturities and remove costly debt at a discount," CEO Ralph Boettger stated.

Sappi had concluded a €750-million acquisition of M-real’s coated graphic paper unit at the end of 2008, saying that this would increase its European graphic paper capacity from 2,6-million tons a year to 4,5-million tons a year, and expand the company’s wood-free coated product offering and customer base.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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