Magazine article American Banker

1st Union Leads $1.1B Loan; Borrower's Debt Load Eyed

Magazine article American Banker

1st Union Leads $1.1B Loan; Borrower's Debt Load Eyed

Article excerpt

A $1.13 billion loan package backing Chesapeake Corp.'s hostile bid for two of its packaging rivals may box the company in, analysts said.

The loan, being led by First Union Corp., will be used by Richmond, Va.-based Chesapeake to fund its reverse hostile bid for Shorewood Packaging Group and Boxmore International PLC. Chesapeake, which makes packaging for such household brand names as Ore Ida and Duracell, is looking to trim costs through consolidation.

But Edward Brennan, a debt analyst at Standard & Poor's Corp., warned that the company may be piling on too much leverage to be justified by the gains consolidation may bring. "The potential benefits are more than offset by management's willingness to adopt a more aggressive financial posture than had been anticipated," he wrote in a report. "Chesapeake will be challenged."

Despite the bid's hostile nature, both First Union and Chesapeake said the leveraged loan is meeting strong response. The loan package includes a $200 million, five-year credit facility; a $350 million, five-year term loan; and a $325 million, six-and-a-half-year term loan -- all priced at the London interbank offered rate plus 250 basis points. It also includes a $250 million, 18-month credit line priced at Libor plus 300 basis points.

The syndicate includes Wachovia Corp., Canadian Imperial Bank of Commerce, Imperial Bank of Japan, and Toronto-Dominion Bank and Trust.

Since Shorewood bid for Chesapeake last October, the companies have been in a heated struggle that has forced Chesapeake -- on the advice of Donaldson Lufkin & Jenrette and Goldman, Sachs & Co. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.