Berry Global Group, Inc. (NYSE:BERY), a leader in plastics products, has announced the issuance of $800 million in senior secured notes due 2031, with an interest rate of 7.250% per annum. The notes were issued on Friday by Treasure Escrow Corporation, a wholly owned subsidiary of Berry, as part of an indenture agreement with U.S. Bank Trust Company, National Association, acting as trustee and collateral agent.
The issuance is connected to Berry's planned Reverse Morris Trust transaction with Glatfelter Corporation, which will be renamed Magnera Corporation. Upon completion of the transaction, Magnera will assume all obligations under the notes, and the Escrow Issuer will be released from its obligations.
The notes, maturing on November 15, 2031, will be guaranteed by Magnera's existing and future subsidiaries that guarantee its term loan credit facility. These notes will be equal in payment rights to Magnera's existing and future unsubordinated indebtedness and will be secured by a first or second priority lien on certain assets.
Magnera has the option to redeem the notes starting November 15, 2027, at declining redemption prices, including a premium if redeemed before this date. Additionally, up to 40% of the notes may be redeemed with equity offering proceeds at a redemption price of 107.250%, subject to certain conditions.
The notes are secured by an escrow arrangement until certain conditions are met, including the Magnera Assumption. If the conditions are not satisfied by March 3, 2025, or an earlier determined date, the notes will be mandatorily redeemed.
The indenture contains restrictive covenants that limit Magnera's ability to incur additional debt, pay dividends, and engage in certain other transactions. The covenants will be suspended if the notes receive investment grade ratings from two or more rating agencies, provided no default has occurred.
In case of a change of control, note holders have the right to require Magnera to repurchase their notes at 101% of the principal amount, plus accrued interest.
In other recent news, Glatfelter Corporation's shareholders have approved a merger with a unit of Berry Global Group, a move that is expected to significantly reshape Glatfelter's business structure and market presence. The merger is set to include Berry's Health, Hygiene, and Specialties Global Nonwovens and Films business. As part of the preparation, Glatfelter will undergo a reverse stock split at a ratio of 1-for-13 and rebrand as Magnera Corporation.
Berry Global Group recently reported a 2% organic volume growth and a 16% increase in adjusted earnings per share in its Q3 2024 earnings call. Operating EBITDA also showed a positive trend, with a 6% rise compared to the same quarter in the previous year.
In line with these developments, James T. Glerum, Jr. has been appointed to Berry Global Group's board of directors. Further, new directors have been announced for the board of the soon-to-be-formed Magnera Corporation, in anticipation of the merger. These developments highlight the ongoing strategic efforts by both Glatfelter and Berry Global Group to enhance efficiency and provide value to stakeholders.
InvestingPro Insights
Berry Global Group's recent $800 million senior secured notes issuance aligns with several positive financial indicators highlighted by InvestingPro. The company's strong financial position is reflected in its market cap of $7.77 billion and a P/E ratio of 14.27, suggesting a reasonable valuation relative to earnings.
InvestingPro Tips reveal that Berry Global has been aggressively buying back shares and offers a high shareholder yield, which could be seen as a sign of confidence in the company's future prospects. This aligns with the company's strategic moves, including the planned Reverse Morris Trust transaction with Glatfelter Corporation.
The company's valuation implies a strong free cash flow yield, which may provide flexibility for future investments or debt management. This could be particularly relevant given the new debt issuance. Additionally, Berry Global's stock is trading near its 52-week high, with a one-year price total return of 28.68%, indicating positive market sentiment.
For investors seeking more comprehensive analysis, InvestingPro offers 7 additional tips for Berry Global, providing deeper insights into the company's financial health and market position.
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