Silgan Holdings Inc. (SLGN), a supplier/provider of consumer goods packaging products, has engaged Deutsche Bank Securities Inc. and Banc of America Securities LLC to refinance its existing senior secured credit facility. Both companies have agreed to organize a syndicate of lenders to provide the rest of the new credit facility as committed by its affiliates. The new credit facility is expected to be completed in the second or third quarter of 2010.

The company expects the new credit facility to extend the maturities and amortization periods of its bank debt and offer increased flexibility regarding Silgan’s strategic initiatives, which includes acquisitions.

Silgan can use a portion of the proceeds of this refinancing to redeem its 6.75% senior subordinated notes due 2013. Further, the company expects to record a charge of approximately 3 cents per share considering a loss on early extinguishment of debt for the write-off of debt issuance costs on completion of the new facility.

The long-term debt of the company as of March 31, 2010 was $863 million, down from $1,019 million as of March 31, 2009, but increase from $799 million as of December 31, 2009. Though the new facility would enhance the amount of borrowings available to the company, the indebtedness increases Silgan’s vulnerability and interest risk exposure.

Cash and cash equivalents amounted to $99 million at the end of the first quarter ended March 31,2010 compared with $201 million in the year-ago comparable period and $305 million at the end of the prior quarter. Given the comparative dips witnessed in the cash position, we consider the stock to be leveraged. The operating cash flow of the company was $204 million compared with leverage free cash flow of $141 million as of March 31, 2010.

Founded in 1987, Stamford, Connecticut-based Silgan has 66 manufacturing facilities operating in North and South America, Europe and Asia. Silgan is also a supplier of metal, composite and plastic vacuum closures for food and beverage products. The company’s products include some of the world’s known branded consumer products – Campbell’s Soup, Del Monte Fruits and Vegetables, Listerine and Friskies Pet Food.
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