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Press release from Business Wire

Packaging Corporation of America Announces Completion of $400 Million Senior Note Offering

Tuesday, June 26, 2012

Packaging Corporation of America Announces Completion of $400 Million Senior Note Offering17:00 EDT Tuesday, June 26, 2012 LAKE FOREST, Ill. (Business Wire) -- Packaging Corporation of America (NYSE: PKG) announced today that the company has completed an underwritten public offering of $400 million of 3.90% senior notes due 2022. The company also announced that it will redeem all of its existing $400 million of ten-year 5.75% senior notes due August 1, 2013 on July 26, 2012. The total cost to redeem the notes is expected to be approximately $432 million, including an estimated redemption premium of $21 million and accrued and unpaid interest through the redemption date of $11 million. The actual redemption premium will be calculated on July 23, 2012 in accordance with the terms of the redeemed notes. The company will fund the redemption with the proceeds received from the completed debt offering and cash on hand. The company also paid $65.5 million to settle an interest rate protection agreement on the ten-year treasury rate, which the company entered into in August 2011, to protect against interest rate increases in connection with the anticipated refinancing of the 5.75% notes. In accordance with accounting rules, net payments of $56 million, from the settlement of interest rate protection agreements and refinancing fees and expenses, will be amortized as additional interest expense over the term of the new ten-year notes. In connection with the debt offering and note redemption, the company expects to record a second quarter after-tax charge of $2 million, or $0.02 per share, and an estimated third quarter after-tax charge of $13 million, or $0.14 per share. Details of the amortized costs and the refinancing charges described above are included on the schedule attached to this release. Commenting on the refinancing, Mark W. Kowlzan, Chief Executive Officer, said, “This transaction lowers PCA's cash interest payments by approximately $7.4 million annually and greatly reduces financing risks and uncertainties through 2022.” PCA is the fourth largest producer of containerboard and corrugated packaging products in the United States with sales of $2.6 billion in 2011. PCA operates four paper mills and 72 corrugated product plants in 26 states across the country. This news release is for informational purposes only and does not constitute an offer to purchase or a solicitation of an offer to purchase the 2013 notes. Certain statements in this news release regarding anticipated outcomes, including the estimated impact of the refinancing to our earnings, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by the use of words such as “will,” “should,” “anticipate,” “believe,” “expect,” “intend,” “estimate,” “hope” and other similar language. These forward-looking statements are based on the current expectations of PCA. Because forward-looking statements involve inherent risks and uncertainties, the actual outcomes could differ materially. Additional information regarding factors that may cause actual results to differ materially from those expressed or implied by such forward-looking statements can be found in the prospectus and prospectus supplement relating to the offering and in the Company's annual, quarterly and current reports on file with the Securities and Exchange Commission. Forward-looking statements are not guarantees of future outcomes and undue reliance should not be placed on these statements, which reflect management's views only as of the date hereof. PCA expressly disclaims any obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.   Packaging Corporation of America   Interest on Existing 5.75% Ten-Year Notes and New 3.90% Ten-Year Notes     Existing 5.75%   New 3.90%Ten-Year NotesTen-Yearto be RedeemedNotes ($ millions)   Annual Cash Interest Payments$23.0$15.6   Annual Amortized Refinancing Costs   Interest Rate Protection Agreement Settlements (2.3) 5.2 1   Fees and Expenses   0.7   0.4   Annual Recorded Interest Expense$21.4$21.2     Debt Refinancing Charges   Second QuarterThird Quarter ($ millions, except per share amounts)   2012   2012     Estimated Note Redemption Premium on 5.75% Notes $ - $ 21.0 2Due August 1, 2013   August 2011 Interest Rate Protection Agreement Early 3.4 - Termination Charge   Final Amortization of July 2003 Interest Rate Protection - (2.2) Agreement Proceeds   Other Refinancing Charges   0.3   2.1   Total Pre Tax Charges$3.7$20.9   Total After Tax Charges$2.3$13.4   Total After Tax Charges Per Share$0.02$0.14 (1)   Includes $9.9 million in proceeds from the settlement of interest rate protection agreements in February 2011 and a $65.5 million payment from the settlement of an interest rate protection agreement in June 2012, net of a $3.4 million second quarter 2012 charge due to settling the interest rate protection agreement prior to December 31, 2012. The remaining amount of $52.2 million will be amortized over the life of the new ten-year notes.   (2) The actual redemption price will equal the present value of the remaining principal and interest payments on the 2013 notes discounted to the date of redemption at the yield to maturity of the comparable treasury issue (as determined at 5:00 PM, New York City time on July 23, 2012), plus a fixed spread of 30 basis points. Packaging Corporation of AmericaBarbara SessionsINVESTOR RELATIONS: (877) 454-2509PCA?s Website: