To facilitate its transformational merger between Smurfit Kappa Group and WestRock Company, which completed in July 2024, the new global leader in sustainable packaging consolidated its existing revolving credit facilities (RCFs) into a new $4.5bn facility that would provide sufficient liquidity for the enlarged group. Smurfit Westrock also sought commitments for a $600m five-year amortising term loan to backstop an existing WestRock term loan.
European-based Smurfit Kappa invited its existing relationship group, as well as US-based WestRock’s relationship lenders – there was not a big overlap between the two syndicates – to participate in the new facilities.
The trans-Atlantic nature of the deal meant there was a need to navigate a diverse lender group, different loan market standards in the US vs Europe and individual requirements to achieve a structure and terms that worked for the combined entity and reflected its improved credit quality (anticipated BBB rating vs BBB- prior to merger), ultimately securing support from the lender group.
For the treasury team, immediate priorities were to secure a material bridge financing package from lenders to fund a $1.5bn cash element of the combination and to backstop existing bank and bond debt, while completing individual consent processes with bond holders and lenders to approve the merger. This allowed the existing debt to remain without having to be repaid or amended.
With those processes completed, the team then shifted its focus to the group’s future liquidity requirements. Core objectives included consolidating available liquidity to reflect the enlarged group, achieving an uncovenanted RCF and other improvements to reflect its strong credit rating, incorporating an ability to access same-day USD funding and establishing a highly supportive bank group.
It was also a key objective of the treasury team to retain a large bank group comprised of lenders that had supported the two businesses historically. Ultimately, 27 lenders committed to the new facility. The Smurfit Kappa treasury team worked closely with WestRock’s treasury, finance and legal teams to understand key operational and documentation requirements that had to be retained in the new facility.
The team also ensured the new facility included “ESG-ready” provisions that allowed a 24-month period to establish key performance indicators.
Taking the best of each entity’s facilities and aligning two large groups of banks to land the new RCF was a big undertaking, and building in an ESG component added to the interest
