JPMorgan and Lehman Brothers are set to hold a bank meeting at the Waldorf Astoria Monday for the financing to back Texas Pacific Group's approximately $1.04 billion leveraged buyout of the consumer packaging division of Smurfit-Stone Containers Corp. Bluegrass Container Co., as the deal is being called, is the company formed by TPG to acquire the division. Terms have not been released as of press time, but the $1.3 billion financing is expected to consist of a first lien and second lien. A TPG spokesman declined comment.
In November, the company began a restructuring plan to reduce costs and improve its position in the marketplace, a company release states. A Smurfit spokesman said the sale is part of a global restructuring the company is taking part in. "The consumer packaging assets are not really our core business," he explained. "We are a market leader in corrugated containers; we do not have the same market position nor the same market leverage in the variety of businesses that make up the consumer packaging division. We want to focus on our core business, which is corrugated containers."
One portfolio manager, who had not seen the terms of the deal, said Smurfit is a core issue in many accounts' portfolios and has been for a long time. He said the company was a much more diverse business with the consumer packaging division, but that he doesn't expect this sale to hurt it.
In May the company asked the banks for an amendment led by Deutsche Bank that would allow it to use $400 million of net cash proceeds from the consumer packaging division sale to prepay senior notes. According to a company release, the tender offer applies to its $300 million 9 1/4% senior notes due 2008 and a portion of its outstanding 9 3/4% senior notes due 2011. The amendment will also establish a $50 million basket to call any remaining outstanding 9 1/4% senior notes that aren't tendered. Commitments were due last Friday.
The portfolio manager said the choice of banks for this deal was most likely based on relationships TPG has, as compared with the historical leads Smurfit typically uses. The spokesman referred all finance related questions to Jeff Beyersdorfer, treasurer, who did not return calls.
JPMorgan and Winston & Strawn served as advisors to Smurfit-Stone and Lehman Brothers, Bank of America and Simpson Thacher & Bartlett served as advisors to TPG.
