Smurfit Kappa is seeking approval from lenders to amend certain terms of its senior credit facilities that will result in a reduction in the overall cost of the group's debt.

A spokesman for the paper and packaging giant declined to give any further details, though in a statement to the stock exchange yesterday, the company said the move would include a reduction in margin across each of its credit facilities.

In its first-quarter results statement released last month, Smurfit said it had successfully reduced net debt by €1.3 billion to €3.5 billion, a move that was welcomed by the market.

The group returned to the stock market in March following a merger a year earlier between Jefferson Smurfit and Dutch firm Kappa Packaging.

The company has had substantial levels of debt since Jefferson Smurfit first left the market upon its acquisition by private equity firms Madison Dearborn, CVC and Cinven in 2002.

As a public company, the group is now seeking to reduce its debt which, at current levels, will require substantial working capital to service.

When the merged group's initial public offering (IPO) took place last March, Smurfit said all but €110 million of the money raised from the share sale would be used to pay down the group's high-yield notes.

At the time, Moody's credit ratings agency upgraded its rating on Smurfit's business to "Ba3" from "B1", citing the €1.4 billion of flotation proceeds going towards paying down the debt.

"The upgrade reflects foremost the sizeable debt reduction, but also an ongoing improvement of Smurfit Kappa's operating performance," Moody's said.

The IPO enabled the company to lower its debt to €4.4 billion from €5.8 billion prior to the placing and to reduce its debts in relation to earnings before interest, tax, depreciation and amortisation.

Last month, Smurfit Kappa said trading in the first four months of the year was "significantly ahead" of the same period last year thanks to a tight market and a positive price environment.