LONDON, June 14 (Reuters) - Shareholders to German packaging company Kloeckner Pentaplast are set for a €426m dividend payout as part of a latest €2bn cross-border loan and bond deal that will also refinance existing debt and back its merger with UK peer Linpac, banking sources said.
Private equity group SVPGlobal announced it would combine the two packaging firms in April intending to increase their clout ahead of a planned stock market listing.
SVP put UK-based Linpac up for sale last year, but after failing to find a buyer at its asking price, chose to merge it with Kloeckner.
Credit Suisse and Rabobank are leading the financing that comprises a €1.58bn five-year covenant-lite dual-currency term loan split between a €725m first-lien term loan and an €855m-equivalent dollar-denominated term loan.
The company also intends to raise €385m of six-year notes at a holding company level, banking sources said.
The notes are likely to launch towards the end of the loan syndication, so the financing of the two asset classes closes at the same time, the sources said.
Lenders have been asked to commit to the loan financing by June 27. The euro-denominated loan is guided to pay 400bp-425bp over Euribor with a 0% floor and a 99 OID, while the dollar loan is guided at 350bp-375bp over Libor with a 1% floor and a 99 OID.
The financing will repay existing debt of €1.4bn including €105m of Linpac’s existing debt; use €135m to fund the acquisition; pay €426 as a dividend; and pay €66m on transaction fees and expenses, the sources said.
Some €130m will be left as cash on the balance sheet post transaction, the sources said.
The financing will also include a 4.5-year revolving credit facility, paying 300bp over Euribor with a 0% floor.
A five-year term loan maturity bucks the standard seven-year term loan maturity in Europe’s leveraged loan market and is being used to target CLO investors conscious of the weighted average life of their CLO vehicles, the sources said.
There is also no need for such a long term loan given the company intends to float, the sources said.
“With every intention to IPO the business, Kloeckner does not need such a long financing as the owners will be out shorter than a typical sponsor would hold for. Five years should be helpful for the weighted average life of CLOs and in theory the borrower should get better pricing for that. If anything the pricing is a little generous in terms of where the market is at the moment,” a banker said.
The deal is expected to receive a B2/B corporate and issue rating.
SVPGlobal was not immediately available to comment.
SVP acquired Kloeckner Pentaplast from private equity firm Blackstone following a lengthy restructuring. Blackstone had bought the company from Cinven in 2007, backed by €1.25bn of leveraged loans.
The buyout group took control of Linpac in late 2014 after buying up large chunks of debt related to a 2003 takeover of Linpac by private equity group Montagu for £860m, which had been backed by a £600m loan. (Editing by Christopher Mangham)