Investors defy markets gloom and pile into Smurfit Kappa's €600m senior bond issuance
Smurfit Kappa expanded its senior bond issuance yesterday to €600m after investors piled into the deal despite a torrid day on markets as anxieties mounted over a protracted trade war between the US and China.
The Dublin-based packaging giant was one of a handful of issuers that decided to brave the conditions and press ahead with the bond sale, according to sources close to the transaction.
The senior notes, which mature in 2026, attracted a final coupon of 2.875pc, although the initial price terms were set at close to 3pc, underlining the strength of investor demand.
Smurfit Kappa, which escaped the clutches of its US suitor, International Paper, earlier this month when an unsolicited buyout move hit the buffers, raised the money to finance the acquisition of the privately-controlled Dutch paper and packaging company, Reparenco.
The family-led group is also expected to use the funds to repay existing debt.
It is understood most of the support stemmed from traditional debt investors although a number of hedge funds participated in the trade.
Sources said the keen appetite partly reflected expectations Smurfit Kappa's credit rating is in line for an upgrade as earnings continue to climb.
Last month the company, led by Tony Smurfit, chalked up a 22pc surge in its first quarter earnings before interest, tax, depreciation and amortisation (ebitda) to €340m.
Management also forecast "materially better" ebitda for 2018 than the full year 2017 figure of €1.24bn.
Smurfit Kappa's decision to pursue its own acquisition strategy just as IP faced into a deadline set by the Irish Takeover Panel to either table another bid or steer clear of its European rival for 12 months, intensified the pressure on the US heavyweight after a near three month courtship.
The Memphis-based group blamed a lack of engagement by Smurfit's board for the offer's collapse.
Smurfit, which had originally looked to tap debt markets for €500m, drafted in Citi and NatWest as joint global coordinators on the deal. Credit Agricole CIB and Danske Bank acted as passive joint bookrunners while Davy served as a co-lead manager.