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Hart raises billions to buy Graham Packaging


Thursday 11th August 2011

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Auckland-based billionaire Graeme Hart has raised $US4 billion ($NZ4.85 billion) as global financial markets melt down, but has paid high interest rates.

New Zealand's richest man has raised the money to fund the purchase of Graham Packaging Company, to further develop the global beverage packaging business he built out of Carter Holt Harvey.

His company called Reynolds Group Holdings has completed a private placement of $US1.5b of senior secured notes maturing in 2019 paying 7.875 percent and $US1 billion of senior notes also due in 2019 paying 9.875 percent.

In addition, Reynolds' lenders are providing $US2 billion of loans on the closing date of the acquisition of Graham Packaging.

In contrast, the New Zealand Government today sold bonds maturing in 2023 at a much cheaper rate of 4.52 percent.

The money raised from the Reynolds Packaging bond sale is being held in escrow until the completion of the acquisition of Graham Packaging. If the acquisition does not complete the money will be returned to investors.

The takeover was first announced in June. Graham is a leading supplier of rigid plastic containers for food, including beverages. Hart has been building a leading position in the global beverage packaging market.

He is paying $US25 a share for Graham Packaging, valuing the company at $US4.5b.

Ratings agency Moody's has previously said Reynolds' overall B2 rating -- defined as "speculative and subject to high credit risk" -- reflected that the company was owned by a single individual.

Counteracting those weaknesses Moody's said the group had good cash flow, strong brands and a commitment to reduce debt.

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