Hart company to take on $NZ4b debt

Photo / Martin Sykes

A company owned by New Zealand's richest man plans to market $US3 billion ($NZ4b) of debt to fund its takeover of a United States plastic bag manufacturer.

Graeme Hart's Auckland-based company, Reynolds Group Holding Ltd, plans to sell $US1.5 billion ($NZ2b) each of secured and unsecured notes, Bloomberg news agency reported.

Moody's rating agency has graded the secured debt Ba3 and the unsecured debt Caa1.

Reynolds Group plans to use proceeds from its sale to help pay for its acquisition of Pactiv Corporation, the US manufacturer of Hefty plastic bags, Bloomberg reported.

The offering follows the company's $US1 billion ($NZ1.33b) sale of eight-year notes in April.

It's takeover target, Pactiv, disclosed earlier this week that higher raw material and operating costs would push its third-quarter net income as much as 15 per cent lower from the previous year.

Earnings before interest, taxes, depreciation and amortization for the quarter would drop to $US164-$US170 million ($NZ218-$NZ226m) from $US194 million ($NZ258m) a year ago, the company said in a filing to the Securities and Exchange Commission.

The company also said it would incur $US11 million ($NZ14m) in start-up costs for new production processes and another $US8 million ($NZ10m) related to the proposed takeover by Reynolds Group.

Company bonds in the top tier of "junk" debt have outperformed lower-rated securities this year, according to Bank of America Merrill Lynch index data.

"There's still plenty of demand for higher-quality paper," Andrew Feltus, at Pioneer Investment Management in Boston told Bloomberg.

Reynolds Group makes consumer food and beverage packaging and storage products and operates through five primary segments: Reynolds Consumer, Reynolds Foodservice, SIG, Evergreen and Closures.

- NZPA