Joint bookrunners Credit Suisse First Boston and Merrill Lynch launched roadshows yesterday (October 19) for a proposed $300 million senior unsecured bond for Sateri International Group with an investor luncheon in Singapore. The leads will then shop the Reg-S 144a offering to investors at a second meeting in Singapore and a lunch in Hong Kong today (October 20). Roadshows in Hong Kong and Los Angeles will follow on October 21, Boston and London on October 24, New York and Zurich on October 25, wrapping up in Geneva on October 26.
The deal, rated Ba3 by Moody's, is split into two tranches consisting of a five-year tranche paying a semi-annual coupon; and a non-call five year tranche that pays a quarterly coupon. It will not be a step-up. Price guidance is expected to follow the conclusion of roadshows.
"It will be a hard deal to do given the current mood in the markets, but a two tranche five-year and perpetual deal makes a lot of sense. It is a textbook structure for this type of offering," says one industry insider. "I don't think this deal will be primarily determined by the current state of the markets, but by how well the leads are able to sell the company to investors."
Sateri International Group is a newly established company and lacks a long-standing track record as an integrated entity. The group owns tree plantations and pulp and paper mills in Bahia Brazil, and Viscose mills in Finland and Jiangxi, China. As a conglomerate Sateri is one of the largest integrated viscose and dissolving pulp producers in the world. Proceeds from the bond sale will be used to finance the expansion and further integration of the Bahia pulp and paper mill. Bahia Pulp operates in the Camacari Petrochemical Complex, located in the Bahia State in the Northeastern region of Brazil, 50 kilometres from Salvador. The mill has a current production capacity of 120,000 TCF tonnes per annum, and is one of the lowest cost producers of dissolving pulp in the world. Upon completion of the expansion in 2006-2007, the mill will have a total capacity of 360,000 and will be the key suppliers of dissolving pulp to the mills of Sateri Oy and Sateri (Jiangxi). "Once the expansion is completed, EBIT margins are expected to improve, while the return to positive free cashflows would provide the group with additional financial flexibility to weather any downturn in key commodity prices."
Moody's says in its preliminary ratings report. Adding, "once the proposed unsecured bond is issued, the level of secured debt will drop to approximately 14.1% of total debt, materially reducing the impact of potential subordination issues. Once the company's 2005 maturities are taken into account, secured debt will be approximately $57.9 million versus a total asset base of approximately $834 million."
