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Strategic & Financial Arguments(TM)
for the pulp and paper industry worldwide

March 2017

Participating as industry experts in pulp and paper financing and M & A deals around the world  for over two decades, we continue to see the same mistakes made over and over.  This newsletter is designed to help you avoid costly mistakes we have seen others make.  We will be giving you one or two points each month to help improve your performance.
 
Anthony Pratt's Visy borrows big bucks to finance big deals

According to The Australian Financial Review, Anthony Pratt has struck a groundbreaking deal for his private manufacturing giant Visy Industries to raise $150 million in long-term debt from two Australian superannuation funds. AustralianSuper, the country's biggest industry super fund and IFM Investors, a fund manager, have agreed to lend the money to box maker and paper recycling firm Visy over 10 years in a deal led by Westpac Banking Corporation's Institutional Bank. The money will be used to refinance existing senior debt.
 
The move mirrors the deals Mr. Pratt has clinched for more than $500 million worth of debt via the private placement market or green bonds in the United States during the past two decades. The borrowed money has been used to fuel the rapid growth of Visy's sister company, Pratt Industries.
 
"We think we are one of the first to do this and we absolutely want to do more," Pratt told The Australian Financial Review. "It is a good deal for us and it is great to have an alternative source of funding, given we are a private company and don't have access to the equity markets in the US."
 
Pratt said that Visy had clinched the super deal after about 12 months of talks, having first started raising the topic with institutions 15 years ago.
 
"This a good deal for us as banks usually are lending to corporates on five- to six-year terms. It is good for Westpac, too, as it helps them with their capital requirements and frees up some money to lend to households. And we have the super funds, which are awash with cash, so I hope this leads to similar deals as we have done in America."
 
As we in the industry know, Anthony Pratt moved to the US in mid-2001 to look after a family business that then consisted of a single, aging paper mill in Macon, Georgia. He now oversees a business employing more than 5,800 people across the US and is now the fifth-largest company in its sector. The former Indiana governor and now US vice-president Mike Pence opened a new Pratt $US1 billion recycled paper mill at Valparaiso, Indiana last year.
 
"We have built three of the last four big paper mills built in our industry," Pratt said. "To give you an idea of the potential there, we are accounting for about 0.1 per cent of the manufacturing sector, worth $US2.2 trillion there. So there is scope for us to grow.
 
"Last year was a record year for us, and America is booming for business right now," he said.
 
Reports of the demise of the pulp and paper industry are greatly exaggerated, and Anthony Pratt is a shining example of how to grow a business.
If you have a casual question or a major deal, call me on my personal cell phone - 404-822-3412 or email me at jthompson@taii.com. We are here to help.

 

Sincerely,

 


Jim Thompson, CEO
Talo Analytic International, Inc.
P & PRI

 
JRT Banker's Engineer