Packaging company Silgan Holdings Inc. ( SLGN ) has declared the completion of a new senior secured credit facility. The company will use proceeds from the facility to refinance its existing senior secured credit facility and will provide greater flexibility with regard to its strategic initiatives.
The new credit facility includes $365 million of US A term loans, €220 million of Euro A term loans (around $301 million), Cdn $70 million of Canadian A term loans (around $64 million) and a $1.0 billion multicurrency revolving loan facility.
The term loans provided under the new credit facility will mature in Jan 2020 and will be used for refinancing. Silgan intends to utilize the proceeds from the revolving loans in its working capital and for meeting other general corporate purposes such as acquisitions, dividend payouts, stock repurchases and the relief of additional debt. The revolving loan facility matures in Jan 2019.
In addition, the new credit facility provides Silgan with an incremental uncommitted multicurrency loan facility for $1.25 billion, which may be increased according to the provision the new credit facility. The loan amount could be used to finance acquisitions and fulfill other permitted purposes.
U.S. dollar loans will bear interest at the Eurodollar Rate or the base rate plus a margin and the interest rate for Euro loans will be the Eurodollar Rate plus a margin. The margins for term loans and revolving loans will be 0.50% based on quarterly adjustment of financial ratios. The interest rate for Canadian dollar loans will be either CDOR Rate or the Canadian prime rate plus a margin of 1.50%.
Wells Fargo Securities, LLC, which is a unit of Wells Fargo & Company ( WFC ) and Merrill Lynch, a subsidiary of Bank of America Corp. ( BAC ), along with Pierce, Fenner & Smith Inc., Citigroup Global Markets Inc. and Goldman Sachs Bank USA were the joint book-running managers for the new credit facility.
Silgan reported earnings of $1.23 per share in the third quarter of 2013, which improved 5.1% year over year but were below the company's guided range of $1.25 to $1.35 per share. Despite volume growth in the metal container business, headwinds related to weather and higher-than-anticipated interest expense affected earnings.
For 2013, Silgan lowered its expectation for adjusted earnings per share to the band of $2.75 to $2.85. The company will benefit from its successful acquisitions, increasing productivity and cost containment initiatives. However, soft demand in Europe remains a concern.
Silgan's exposure to Europe has increased following its Vogel & Noot acquisition and expansion of the Closures segment in the region. Additional pricing pressure is expected as the European scenario will likely remain challenging over the next few quarters.
Stamford, Conn.-based Silgan is a leading manufacturer of consumer goods packaging products, operating 81 manufacturing facilities in North and South America, Europe and Asia. In North America, Silgan is the largest supplier of metal containers for food products and a major supplier of plastic containers for personal care products.
Currently, Silgan has a Zacks Rank #3 (Hold). A stock worth considering in the same industry is Ball Corp. ( BLL ) with a Zacks Rank #2 (Buy).
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