Fri 01/14/2022 13:01 PM
Share this article:
Jefferies is sounding out potential investors in the U.S. for a $600 million senior secured five-year bond from Cerdia. The Switzerland-based cigarette filter manufacturer aims to use the proceeds together with cash on its balance sheet and roughly €10 million from a recent property disposal to refinance its looming loan debt, sources told Reorg.

The group has a €350 million term loan paying Euribor+4.75% and a $230.4 million term loan paying LIBOR+5.5%, which mature in March next year. A small minority of the loans are held by Blackstone-owned GSO, as reported.

Cerdia would be 4.4x net levered under the new deal based on September 2021 adjusted pro forma EBITDA of $132.7 million and $583.7 million net debt, including $16.3 million of cash, sources said.

The group had previously extended its RCF from lenders to March 2023, when the loans mature, to provide it with some additional breathing space to work on its capital structure. The RCF was originally due in 2022.

The refinancing will be challenging given the increased focus on ESG standards in the leveraged finance markets since the original deal was syndicated back in 2017, sources said previously.

Moody’s had affirmed Cerdia’s B3 rating in August last year and changed the outlook to stable from negative on the back of the RCF extension and the group’s stable performance.

The ratings agency said it expected Cerdia’s leverage to decline over a turn throughout the next 12 to 18 months, mainly driven by material cost savings from the closure of the Roussillon facility in France.

However, Moody's warned that Cerdia will need to continuously improve efficiency in order to offset cost inflation and pressure on its global tobacco end market, with cigarette volumes declining by more than 2% every year.

The agency also highlighted that Cerdia is the smallest competitor in an oligopolistic and structurally declining industry. This might make it difficult to remain cost competitive given it has lower economies of scale than competitors as it only operates four plants and has already materially reduced costs in the past three years.

Cerdia was acquired by Blackstone from Solvay in 2017 (when the company traded as Rhodia Acetow) for about €1 billion. The group operates production sites in Germany, Brazil, France, Russia and the U.S. and produces acetate tow, a derivative of wood pulp that is used in cigarette filters and other products.

Blackstone declined to comment.

–Robert Schach
Share this article:
This article is an example of the content you may receive if you subscribe to a product of Reorg Research, Inc. or one of its affiliates (collectively, “Reorg”). The information contained herein should not be construed as legal, investment, accounting or other professional services advice on any subject. Reorg, its affiliates, officers, directors, partners and employees expressly disclaim all liability in respect to actions taken or not taken based on any or all the contents of this publication. Copyright © 2022 Reorg Research, Inc. All rights reserved.
Thank you for signing up
for Reorg on the Record!