Hart firm seeks loan backers for $8.2b buy

Graeme Hart. Photo / Dean Purcell

Reynolds Group, owned by New Zealander Graeme Hart, is seeking commitments by September 27 for US$1.5 billion ($2.1 billion) of term loans to fund its purchase of Pactiv, according to a source familiar with the transaction.

The maker of Reynolds Wrap aluminum foil, a unit of Hart's Rank Group, may start marketing a planned sale of US$2 billion in senior secured notes and US$1.5 billion in senior unsecured notes in late October to complete the acquisition financing, the source said, asking not to be named as the talks are private.

A meeting for lenders about the loans was held yesterday, the person said.

Auckland-based Reynolds agreed to buy Pactiv last month for US$33.25 a share, according to a regulatory filing, 39 per cent more than the US$23.97 close on May 14 before talks were disclosed.

The acquisition, worth about US$6 billion ($8.2 billion), is the biggest deal for 55-year-old Hart, a former tow-truck driver who built his fortune buying grocery, dairy and retail assets through his closely held Rank Group.

Credit Suisse Group, HSBC Holdings and Australia & New Zealand Banking Group agreed to provide the debt to fund the buyout, Illinois-based Pactiv said in the filing.

A US$500 million term loan A portion due in August 2015 will have an interest rate of 4.5 percentage points more than the London interbank offered rate, with a 2 per cent Libor floor, another source said. The loan is expected to price at 99 cents on the dollar.

A US$1 billion term loan B portion due in March 2016 will have an interest rate of 5 percentage points over Libor, with a 2 per cent floor, according to that person. 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 collateralised loan obligations.

The senior secured and senior unsecured notes will have terms of eight years, Moody's Investors Service said in a statement. The risk assessor gave provisional rankings of Ba3 to the term loans and the senior secured notes and Caa1 to the senior unsecured debt, according to the statement.

- BLOOMBERG