Paper packaging maker Smurfit Kappa confirmed today that it planned to float on the Irish Stock Exchange and raise around €1.3 billion ($1.70 billion) to repay debt.
Gary McGann, group chief executive, said in a statement that the company wanted to become the world's pre-eminent paper packaging group, and paid tribute to Chairman Michael Smurfit, who will retire from the board.
"His vision transformed a small, locally trading box plant from Dublin into an industry leader," McGann said. Smurfit Kappa was formed in 2005 by the merger of Ireland's Jefferson Smurfit and Dutch-based Kappa Packaging, and is owned by private equity firms Madison Dearborn Partners, Cinven and CVC and by management.
Deutsche Bank is global coordinator for the stock offering, with Citigroup, Davy and Goldman Sachs as joint bookrunners.
A source familiar with the offering said the company hoped to publish a prospectus on the listing in the next 10 days or so with a view to a public offering by mid-March. The cost of insuring Smurfit's debt against default fell today. Five-year credit default swaps fell around 20 basis points to 165 basis points by 12.40pm, a dealer in London said.
Smurfit Kappa said it had launched a cash tender offer for all its 11.5 per cent payment-in-kind notes due 2015 and a portion of its senior notes due 2012. For full details of the tender, please double click on.
The company, which had net debt of €4.5 billion at the end of December, said it had not been tempted to raise more money through the stock market listing in order to be able to pay off a bigger chunk of its debt.
"We just felt that it (€1.3 billion euros) was an appropriate number in terms of leverage," chief financial officer Ian Curley said in a conference call, adding the firm was not immediately looking for a significant boost to its credit rating.
"We are not focused in the medium term on being investment grade credit," he said of a company that Standard & Poor's (S&P) rates as B+, which is four notches below the investment grade level that indicates a relatively low-risk investment. Mr Curley said he expected the stock market listing to be "a positive event" in terms of Smurfit Kappa's rating.
The company said earnings before interest, tax, depreciation and amortisation (EBITDA) in 2006 were €596 million on revenue of €6.97 billion. The company had said in January it was considering a listing and would ask approval from its creditors for changes to its borrowing terms.