Resolute Forest Products aims to reduce interest cost with new 10-year notes

MONTREAL – Resolute Forest Products Inc. (TSX:RFP) said Friday it has priced its previously announced private offering of US$600 million in senior 10-year notes, which will pay a substantially lower interest rate than the securities they replace.

The Montreal-based paper, pulp and lumber producer says the notes, which will mature in 2013, will pay 5.875 per cent annual interest. They’ll be sold at a slight discount to their face value — 99.062 per cent of par.

The money raised will be used to repay the company’s $501.2 million senior secured notes due 2018, which pay 10.25 per cent interest annually. The company is offering to pay $1,166.94 per $1,000 of principal in the 2018 notes.

Resolute’s tender offer for the 2018 notes is set to expire at midnight May 21.

At the same time, Resolute is asking holders of the 2018 notes to amend the terms of the securities to remove most of their restrictive covenants and release all collateral pledged to secure the obligations.

The new 2023 notes will be unsecured but payments will be guaranteed by Resolute’s U.S. subsidiaries, the company said.

The company said the new notes are being offered to qualified institutional buyers.

Resolute, formerly known as AbitibiBowater, produces newsprint, commercial printing papers, pulp and wood products.

The company underwent a court-supervised restructuring which it completed in December 2010 that saw it cut costs and reduce its debt from $6.8 billion to $850 million.