Amcor's refi packs a punch

* Loans: Aussie packaging maker launches US$4.5bn loan ahead of US merger

By Prakash Chakravarti, Chien Mi Wong and Sophia Rodrigues

HONG KONG/SYDNEY, March 22 (IFR) - Australian packaging company Amcor has launched a US$4.5bn refinancing to back its proposed merger with US-based Bemis, adding to a surge in event-driven financings in the country since the beginning of the year.

Amcor's US$5.25bn all-stock purchase of Bemis is the 158-year old company's biggest acquisition, for which it is raising its largest-ever loan to refinance debt as part of the process.

Sole mandated lender JP Morgan launched the multi-tranche loan, Australia's largest this year, last week to global lenders.

Full terms of the financing are not available, but the strong credit profiles of Amcor and Bemis and their relationship pull will appeal to lenders.

“Amcor is a very well rated credit and has deep relationships with many banks globally,” a loan banker in Sydney said. “It will tap into existing as well as new liquidity for this refinancing.”

Both Amcor and Bemis are Triple B credits. Amcor is rated Baa2/BBB/BBB+, while Bemis is BBB− (S&P). Amcor's net debt-to-Ebitda ratio was 2.8x as of December 31, while Bemis had net debt to adjusted Ebitda of 2.2x.

Amcor's annual report for the year ending June 2018 showed bank loans totalling about US$3bn, including a A$100m (US$71m) multi-currency facility maturing in June 2021, a US$565m loan due in July 2020, a US$775m facility maturing in February 2021, a US$750m loan due in April 2019 and a €750m (US$851m) borrowing maturing in November 2022.

Bemis was last in the market in July 2016, when it extended the maturity of a US$1.1bn revolver to July 2022 from August 2018.

Both companies have strong relationships with banks globally, but are close to JP Morgan, which was lead left on the July 2014 loan for Bemis and a US$750m 4.4-year revolver for Amcor the same year, according to LPC data.

JUMBO DEBT PACKAGES

JP Morgan was also one of two banks mandated on a US$7.75bn senior debt financing last April that backed US private equity firm Harbour Energy’s failed leveraged buyout of Australian oil and gas producer Santos.

The US$10.8bn offer was rejected, but would have been the biggest Asia Pacific LBO financing if it had crossed the line, and highlights JP Morgan's regional M&A financing expertise.

Amcor’s merger with Bemis was already taking shape at that time, as the two companies started talks in January last year. The merger is expected to close in the second quarter this year subject to some conditions. The European Commission has already approved the deal.

The transaction is Amcor’s 12th acquisition since 2016 and the 12th largest outbound M&A deal for an Australian listed company, according to Refinitiv data.

The US$4.5bn refinancing is one of several large event-driven financings from Australia this year and promises to boost loan volume amid an upturn in M&A activity, in contrast to 2018.

A A$2.15bn leveraged loan backing Australian hospital operator Healthscope's second take-private buyout is seeking commitments from lenders in senior syndication.

Another A$1.21bn-equivalent leveraged loan backing a second take-private of Australian accounting and business services software firm MYOB Group closed in early March.

Last year was a dismal year for M&A lending in Australia, plummeting 53% to US$5.94bn from the US$12.7bn clocked in 2017. However, overall loan volumes in Australia jumped 17% to US$95.53bn in 2018 compared to US$81.77bn a year earlier. In the first two months of 2019, Australian loan volumes have totalled US$6.34bn. ( Reporting By Prakash Chakravarti, Chien Mi Wong and Sophia Rodrigues; Editing by Tessa Walsh and Vincent Baby)