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Mauser Packaging: New Issue
Lauren Holland - Senior Analyst – Paper & Packaging
Paul Chambers - Analyst - Global Paper and Packaging
EXECUTIVE SUMMARY
- We like the new Mauser Packaging (BWY, Caa2/CCC+/NR, Market perform) 1L notes down to the mid 7s on a relative value basis, as they look cheap compared to similar maturity existing O-I Glass (OI, B2/B+/NR, Outperform)
- BWAY is in the market with $2.75 billion of Senior First Lien Notes due 2026. Proceeds from the issuance together with borrowing under the company’s term loan facility and an equity investment of $620 million from its parent company Stone Canyon Industries will be used to refinance its existing secured notes and 2017 term loan facility.
- Pro forma for the transactions, net secured leverage comes to 2.9x and net leverage to 4.1x based on LTM Further Adjusted EBITDA of $1.1 billion.
- S&P upgraded Mauser’s issuer rating one notch to B from B- with a stable outlook.
- We will look to re-evaluate our recommendation when the company reports full 4Q22 results.
RELATIVE VALUE
The acceleration of the timeline for the BWAY deal speaks to the uptick in risk appetite for investors, and bodes well for the company to reach its financing goals. As spreads have tightened YTD, the expected cost of capital for the company has improved since our 3Q22 update. While we still note the increased cash interest expense, we have more confidence in the company’s ability to execute on its performance improvement plans, which, along with some inflationary tailwinds, will lead to EBITDA growth in 2023 and beyond.
Price talk on the 1L notes is in the mid 8s, approximately 75bp behind the proposed 2L notes which are being offered via exchange for the existing senior unsec notes.
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