Pactiv Evergreen Inc. Successfully Reprices and Upsizes Term Loan

Rhea-AI Summary

Pactiv Evergreen Inc. (NASDAQ: PTVE) has successfully repriced and upsized its $990 million senior secured Term Loan B to $1.33 billion, maturing on September 24, 2028. The interest rate margin on these loans has been reduced by 75 basis points, from 3.25% to 2.50%, and an 11 basis point credit spread adjustment has been removed. The company also prepaid its $690 million Term Loan B, due February 2026, using proceeds from the upsized loan and a $350 million draw from its revolving credit facility. This refinancing is expected to lower the company’s annual cash interest expense by approximately $14 million. CFO Jon Baksht highlighted the strong lender support and the benefits of extended debt maturities and reduced interest expenses, which will enhance the company's ability to reinvest and de-lever its balance sheet.

Positive

• Successfully repriced and upsized Term Loan B from $990 million to $1.33 billion.
• Interest rate margin reduced by 75 basis points, from 3.25% to 2.50%.
• Removal of 11 basis point credit spread adjustment.
• Annual cash interest expense reduced by approximately $14 million.
• Extended debt maturities to September 24, 2028.
• Enhanced financial flexibility for reinvestment and de-leveraging.

Negative

• Increased principal balance on debt from $990 million to $1.33 billion.
• Dependency on the revolving credit facility, drawing $350 million.
• Continued high level of debt despite refinancing.

Insights

Financial Analyst

Pactiv Evergreen Inc. has taken a significant step in managing its debt by repricing and upsizing its term loans. This move accomplishes several strategic financial objectives. By reducing the interest rate margin from 3.25 percent to 2.50 percent and removing the 11-basis point credit spread adjustment, the company will save approximately $14 million annually in cash interest expense. These savings provide Pactiv Evergreen with additional cash flow that can be reinvested into the business or used to further reduce debt, contributing to a healthier balance sheet.

The extension of debt maturities from 2026 to 2028 also provides the company with a longer runway to manage its financial obligations. This is particularly important in volatile economic conditions where shorter debt maturities could pose refinancing risks. The increase in the principal balance to $1.33 billion indicates strong demand and lender confidence, which is a positive sign for investors regarding the company's creditworthiness and financial stability.

Market Research Analyst

From a market perspective, the successful repricing and upsizing of Pactiv Evergreen's term loans reflect positively on the company's financial health and its ability to attract lender support. This transaction reduces the company's cost of borrowing, freeing up capital that can be used for growth initiatives or further debt reduction. It also signals to the market that the company is proactively managing its debt, which can enhance investor confidence and potentially positively impact the stock price.

Moreover, the reduction in annualized cash interest expense by $14 million represents an efficient use of resources, aligning with shareholder interests by potentially increasing net income and earnings per share. These financial maneuvers illustrate a well-thought-out strategy to optimize the company's capital structure, which can be appealing to both current and prospective investors.

LAKE FOREST, Ill., May 29, 2024 (GLOBE NEWSWIRE) -- Pactiv Evergreen Inc. (NASDAQ: PTVE) (“Pactiv Evergreen” or the “Company”) today announced that the Company successfully completed the repricing and upsizing of its $990 million senior secured Term Loan B due September 24, 2028 (the “B-4 Term Loans”) and the subsequent prepayment of its $690 million senior secured Term Loan B due February 4, 2026 (the “B-2 Term Loans”).

This transaction reduced the interest rate margin applicable to the B-4 Term Loans by 75 basis points, from 3.25% to 2.50%, and removed the 11 basis point credit spread adjustment from the pricing structure of the B-4 Term Loans. In addition, the B-4 Term Loans were upsized, at par, by $340 million, increasing the principal balance to $1.33 billion. The proceeds of the B-4 Term Loans, together with the proceeds of a $350 million draw upon the Company’s revolving credit facility, were used to prepay in full the B-2 Term Loans. Collectively, the repricing and prepayment reduce the Company’s annualized cash interest expense by approximately $14 million.

Jon Baksht, Chief Financial Officer of Pactiv Evergreen, said, “We are pleased with the strong demand and lender support for the repricing and upsizing. As a result of the transaction, we have extended our debt maturities and reduced our annual interest expense, enhancing our flexibility to reinvest in the Company and further de-lever the balance sheet.”

About Pactiv Evergreen Inc.

Pactiv Evergreen Inc. (NASDAQ: PTVE) is a leading manufacturer and distributor of fresh foodservice and food merchandising products and fresh beverage cartons in North America. The Company produces a broad range of on-trend and feature-rich products that protect, package and display food and beverages for today’s consumers. Its products, many of which are made with recycled, recyclable or renewable materials, are sold to a diversified mix of customers, including restaurants, foodservice distributors, retailers, food and beverage producers, packers and processors. Learn more at www.pactivevergreen.com.

Contact:
Curt Worthington
847.482.2040
InvestorRelations@pactivevergreen.com

FAQ

What is the new interest rate margin for Pactiv Evergreen's B-4 Term Loans?

The new interest rate margin is 2.50%, reduced by 75 basis points from the previous margin of 3.25%.

How much has Pactiv Evergreen reduced its annual cash interest expense?

The company's annual cash interest expense has been reduced by approximately $14 million.

What is the new principal balance of Pactiv Evergreen’s upsized Term Loan B?

The new principal balance of the upsized Term Loan B is $1.33 billion.

When is the new maturity date for Pactiv Evergreen’s Term Loan B?

The new maturity date for the Term Loan B is September 24, 2028.

What was the purpose of Pactiv Evergreen drawing $350 million from its revolving credit facility?

The $350 million drawn from the revolving credit facility was used to prepay the $690 million senior secured Term Loan B due February 2026.