Graphic Packaging Holding Company’s (GPK - Free Report) operating subsidiary, Graphic Packaging International, LLC, announced the pricing of $300-million notes offering due to expire in 2027.
As noted, the company will issue the senior unsecured notes at par value. The notes will bear annual interest rate of 4.75%. Guarantee on the notes will be provided by Graphic Packaging International Partners, LLC; Field Container Queretaro (USA), L.L.C.; and certain subsidiaries of Graphic Packaging International.
Subject to fulfillment of customary closing conditions, this offering is anticipated to close on Jun 25, 2019.
Graphic Packaging International anticipates net proceeds of $295 million from the offering. This amount is after deducting offering expenses as well as discounts to initial purchasers. It intends to use the proceeds for repaying debt under its revolving credit facility.
Graphic Packaging Holding’s Debt Profile
Graphic Packaging Holding has a highly leveraged balance sheet. Its long-term debt was $3,129.8 million at the end of the first quarter of 2019. This reflected an increase of 7.7% from the fourth quarter of 2018. Also, the company’s total debt/total equity was 158.5% at the end of first-quarter 2019, up from 146.5% at the end of fourth-quarter 2018. Net interest expenses in the first quarter of 2019 increased 21.5% year over year to $35 million.
Although the current notes offering will help in repaying the company’s debts, we believe that it will add to its existing debt balance. Unwarranted rise in debt levels, in turn, can inflate its financial obligations and hurt profitability.
Zacks Rank & Stocks to Consider
With a market capitalization of $4.2 billion, Graphic Packaging Holding currently carries a Zacks Rank #3 (Hold). In the past 60 days, the Zacks Consensus Estimate for its earnings has remained unchanged at $85 cents per share for 2019 and increased 3.2% to 97 cents for 2020.
Graphic Packaging Holding Company Price and Consensus