Smurfit Kappa to save €3m interest

Paper and packaging giant Smurfit Kappa Group stands to make annual interest cost savings of around €3m, by repaying €500m of debt four years ahead of schedule.

The redemption, being made via subsidiary firm Smurfit Kappa Acquisitions, will be funded from existing credit facilities and approximately €220m from the group’s existing cash resources. As of the end of June, SKG had balances of around €471m.

The Dublin-based group will incur a once-off exceptional cost of around €26m, due to the redemption premium and the accelerated amortisation of unamortised deferred debt issue costs, but will also see significant annual cost savings. The move will be immediately earnings accretive, with an annualised increase in earnings per share of around 11% expected. The 7.25% coupon senior notes were originally due to mature in 2017.

SKG’s chief financial officer, Ian Curley, said the transaction marks a “further significant step” in reducing the group’s funding costs, following the shift of its debt portfolio to an unsecured corporate profile.

“The redemption further lowers SKG’s overall cost of capital, materially reduces debt servicing costs and enhances earnings and free cash flow,” he said.