March 03, 2025 11:29 GMT
EM CEEMEA CREDIT: SAPPI: New Issue 7NC3 SLB - Credit
EM CEEMEA CREDIT
SAPPI ( SAPPI: Ba2/BB/BB+)
New issue 7NC3 SLB
- SAPPI the pulp and speciality paper producer is in the market for a EUR300mn 7NC3 Sustainability linked bond. The proceeds will be used to refi the existing 3.125% 26 notes and for GCP. The bond will rank pari passu with the 3.625% 28 which benefit from similar guarantees to the RCF. Note the existing 32’s are rated 2 notches below the CCR by Moody’s due to their structural subordination.
- SAPPI is not constrained by the S Africa’s sov rating due to its size (15% of global mkt share of dissolving pulp) and geographical diversification, EU 42% of rev, US 32% and SA 26%. The biz had a bumper cycle in FY22 and has since been suffering from a weaker operating environment particularly in Graphic paper (47% of sales). SAPPI has been repositioning via its Thrive strategy, selling and converting underperforming assets.
- Management has a conservative financial policy with target net debt to EBITDA below 1.5x (1.9x at the end of Dec 24). FY24 FCF generation of $244mn, liquidity of USD942mn (USD283 cash and USD642mn in undrawn facilities) and no significant near-term maturities means SAPPI has a stable financial profile.
- Sappi is in a tough sector but is well managed. The existing 7.5% Jun32’s which are structurally sub seem to be around Z+266bp and we expect these to be the anchor point for pricing.
Keep reading...Show less
229 words