The debt structure of Graham Packaging Holdings Co.—the second-oldest investment in The
Last month, the York, Pa.-based maker of plastic containers was able to amend the terms and maturity dates of its term loan and revolver, which together have a combined value of approximately $1.45 billion.
The amendment pushed back the maturity of Graham Packaging’s existing $1.2 billion term loan to April 2014 from October 2011 in addition to extending the maturity of $125 million of the company’s existing $250 million revolving credit facility to 2013 from October 2010. Calls to Blackstone and Graham Packaging were not returned by press time.
Graham Packaging CEO Mark Burgess said in a statement that it was “prudent to take advantage of [the company’s] strong operational performance” to extend the maturities at this point in time, despite the fact that the company had well over a year before the earlier of the two maturities came due. He said the move was made sooner rather than later to “limit the risk of future refinancing.”
Graham Packaging recorded net sales of $566.4 million for the three months ended March 31, a decrease of more than 15 percent from the $669.4 million in net sales generated in the same period a year earlier, according to a 10-Q filing. The company attributed much of the lost sales to an overall reduction in resin costs, which are passed through to customers. It also said that competitive pressures led to a 5.6 percent decrease in the overall number of container units sold by the company during the three-month period.
Despite the decrease in sales, net income at the company increased nearly four-fold to $18.8 million for the three months ended March 31 from $3.8 million in the year-ago equivalent period. A reduction in interest payments, the strengthening of the U.S. dollar against the euro and other currencies and the aforementioned reduction in raw material costs were all reasons cited for the increase.
On May 22, Moody’s Investors Service issued a statement in which it assigned a ‘B1’ rating to both the company’s new revolving credit facility and term loan C. The ratings agency also affirmed Graham Packaging’s ‘B2’ corporate family rating and stable outlook, which it has maintained since June 2008.
Moody’s said the ratings are supported by the company’s strong competitive position, success in its performance improvement initiative and good liquidity including a large cash balance, but said they are constrained by Graham Packaging’s high customer concentration, low growth and free cash flow to debt that is “weak for the rating category.”
Industrywise, the food and beverage market is the largest source of business for Graham Packaging. Customers including Coca-Cola North America, H.J. Heinz Co., PepsiCo and Welch Foods were responsible for approximately 61.0 percent of the company’s net sales for the year ended Dec. 31, 2008—up from 60.3 percent and 58.7 for the same periods in 2007 and 2006, respectively.
The Blackstone Group acquired Graham Packaging in February 1998 for approximately $2.3 billion. In October 2004, the firm nearly doubled Graham Packaging with the add-on acquisition of the blow-molded plastic container business Owens-Illinois Inc. Today the company, which is held in
The company is the second oldest current investment in Blackstone’s portfolio. Allied Waste Industries, the second-largest municipal solid waste management company in the United States, is the firm’s oldest active investment, having been acquired in May 1997 for a little more than $2 billion.