Smurfit Kappa expects to save €13 million each year from a refinancing of its secured senior debt, which involved 22 banks and was oversubscribed.

The paper and packaging group confirmed yesterday that it had agreed a new unsecured €1.375 billion five-year arrangement, comprising a €750 million term loan and a €625 million revolving credit facility.

It has also put in place a five-year receivables securitisation programme of up to €175 million, which will sit alongside the group’s existing €250 million securitisation programme.

Crucially, the arrangements complete the company’s transition from the highly-leveraged profile it took on after 2002’s take private to a “corporate” status. They will carry a one-off cost of €16 million but will immediately add to earnings.

Smurfit Kappa chief financial officer Ian Curley said the new facilities would help to "provide greater financial flexibility" that included the potential to refinance some of its more expensive bond debt "at the appropriate time".

Combined savings
Davy suggested that Mr Curley could be referring to €500 million of 7.25 per cent 2017 bonds which become callable in November this year, calculating that the ultimate combined savings from the refinancing could be up to €35 million annually.

Goodbody noted that the company’s dividend now had the potential to double over three years, while maintaining comfortable cover.

The €1.375 billion transaction was initially marketed at €1.1 billion, with the level raised after it was oversubscribed.