Smurfit Kappa sells €500m of bonds to refinance borrowings

Smurfit Kappa sold €500 million of bonds on Tuesday as it sought to repay existing debt from a number of banks, which jumped last year after the cardboard boxmaker made an intial foray into the Brazilian market with the purchase of two local companies.

The bonds, which were sold through a private placement, ended up being priced to carry coupon, or interest rate, just below 2.37 per cent, according to market sources. That was below an initial estimate of 2.7 per cent, when banks leading the transaction, Credit Agricole, Danske Bank, HSBC and NatWest, started drawing in orders.

AIB, Bank of Ireland and Davy in Dublin acted as co-managers on the deal.

Smurfit Kappa said it intends to use most of the proceeds from the bond offering to repay €260 million of borrowings under the term loan facilities with lenders and €220 million of its existing securitisation facilities.

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Acquisitions

After spending €380 million on acquisitions in 2015, including the two deals giving the group access to the Brazilian market, Smurfit Kappa’s term loans increased by 50 per cent in February to €750 million. Its net debt at the end of September, the most recent date for which accounts are available, amounted to €2.95 billion.

Meanwhile, Smurfit Kappa, led by chief executive Tony Smurfit, said on Tuesday it has obtained commitments to increase the revolving facility under its senior facilities agreement by up to €220 million and intends to utilise the additional capacity from time to time for general corporate purposes, including refinancing existing indebtedness.

“I think this is a quite prudent move by Smurfit Kappa to manage the make-up of its balance sheet and get out there to refinance part of the existing loan facilities with bonds ahead of other companies – particularly given some of the geopolitical risks and uncertainty on how they will influence financial markets over the coming months.” said David O’Brien, an analyst with Goodbody Stockbrokers in Dublin.

Bond traders see develoments surrounding Brexit, the incoming US administration under president-elect Donald Trump, a number of national elections in Europe among the key known geopolitical issues facing financial markets in 2017.