Warburg set to raise €170m in bonds to part-fund Clondalkin acquisition

The new owner of Irish packaging products group Clondalkin plans to raise €170 million to part-fund the acquisition.

Warburg Pincus acquired around 88 per cent of Clondalkin for €630 million last month. The move marked the largest investment by the private equity house in Europe to date.

Clondalkin said yesterday it would issue a high-yield bond for around €170 million. It will also buy back the €125 million outstanding on an existing bond, which does not mature until 2010.

The 2010 issue paid interest of 10.625 per cent and the firm has said it will pay 111.625 per cent of face value to redeem them.

The new bond will be issued early next month.

Warburg Pincus will fund the €460 million balance of the Clondalkin acquisition price with senior debt.

Clondalkin, which manufactures lids and seals for dairy product containers along with plastic flower sleeves and freezer bags, was sold by a consortium of private investors led by British private equity house Candover.

The Candover group had funded the management buyout of the company in late 1999. At the time, Clondalkin was the first Irish-listed company to leave the exchange by way of a management buyout.

Ratings agencies have announced a review of the ratings on the company's debt following the acquisition.

Moody's said that, while the firm's recent operating performance had been satisfactory, it expected Clondalkin's overall level of indebtedness to increase as a result of the deal.

Announcing the review earlier this month, Moody's said it believed there was a strong possibility the firm's existing debt would be refinanced.

Both bondholders and lenders hold options to force the firm to redeem the debt should ownership change.

Standard & Poor's has also announced a review. The outcome of the reviews may not be known until early April.

Clondalkin has sales of around €700 million and operates in more than 40 countries. It hopes to leverage Warburg Pincus's expertise to expand its US operations and branch into Asia. - (Additional reporting, Reuters)