Reynolds Group sets price guidance on Pactiv buyout loans
Reynolds Group Holdings Ltd. this week set price guidance on $1.5 billion of loans it will use to fund its purchase of Lake Forest-based Pactiv Corp., as activity grows in the primary loan market.
Reynolds is joined this week by Valeant Pharmaceuticals International, which is seeking $1.875 billion in loans to finance its merger with Biovail Corp. and NBTY Inc., borrowing $1.5 billion to fund its acquisition by the Carlyle Group.
Companies are currently raising more than $11 billion of leveraged loans, with about $9.6 billion in the market this week, according to data compiled by Bloomberg. Around $220 billion of the debt has been arranged so far this year, up from $87 billion in the corresponding period last year.
"The leading driver is the bond-for-loan cash recycle," said Chris Taggert, a senior loan strategist at the debt- research firm CreditSights Inc. in New York. "Expectations for, and actual, bond-for-loan takeouts lead to expectations for the recycling of loan repayments into new loan investments."
The Standard & Poor's/LSTA U.S. Leveraged Loan 100 Index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, rose to 89.57 cents on the dollar yesterday, down from 92.9 cents on April 26. Prices are up 51 percent from Dec. 17, 2008, when the index closed at 59.2 cents.
Reynolds, the maker of Reynolds Wrap aluminum foil, set the interest rate on a $500 million term loan A portion due August 2015 at 4.5 percentage points more than the London interbank offered rate, with a 2 percent Libor floor, according to a person familiar with the transaction. The loan is expected to price at 99 cents on the dollar.
Reynolds' Term LoanA $1 billion term loan B portion due March 2016 will have an interest rate of 5 percentage points over Libor, with a 2 percent floor, said the person, who declined to be identified because the talks are private. That loan is expected to price at 98 cents on the dollar. Libor is the rate banks charge to lend to each other.A term loan A is sold mostly to banks, while a term loan B is sold to investors such as mutual funds, hedge funds or institutions that arrange collateralized loan obligations.Credit Suisse Group AG, HSBC Holdings Plc and Australia New Zealand Banking Group Ltd. agreed to provide the debt, Pactiv said in an Aug. 17 regulatory filing. A bank meeting with investors will be held Sept. 13.New Zealand-based Reynolds agreed to buy Pactiv for $33.25 a share, according to the filing, 39 percent more than the $23.97 close on May 14 before talks were disclosed. The transaction is valued at about $6 billion.Valeant TransactionValeant Pharmaceuticals, the U.S. company merging with Biovail Corp., Canada's largest publicly-traded drugmaker, reduced the size of the loan facility it's seeking after deciding to sell $1 billion in senior notes, according to a person familiar with the deal. The loans will be used to finance the merger and fund a dividend.Valeant, based in Aliso Viejo, California, was initially seeking $3.02 billion in loans, said the person.The new facility will include a $250 million revolving credit line due 2015, a $750 million term loan A due 2015, a $725 million term loan B due 2016 and a $150 million delayed- draw term loan B due 2016, SP said yesterday in a report. The firm rated the loan BB+, one step below investment-grade.Goldman Sachs Group Inc., Morgan Stanley and Jefferies Group Inc. are arranging the debt, according to a June 23 regulatory filing by Mississauga, Ontario-based Biovail.The interest rate on the revolver and the term loan A were set at 4.5 percentage points over Libor, according to the filing. The interest rate on the term loan B was set at 4.75 percentage points over Libor, with a 1.75 percent Libor floor.