RJR Asks Banks to Ease Terms on $6 Billion in Loans
RJR Nabisco Inc. has approached its banks about easing the terms on $6 billion in loans, according to sources with knowledge of the talks.
RJR is arguing that relaxed terms are justified because it has dramatically shored up its balance sheet since undergoing a $25-billion leveraged buyout two years ago, the sources said.
The giant tobacco and food company has reduced its outstanding debt by $7 billion and raised $2.7 billion in equity since last summer.
The New York-based company wants its lenders to relax conditions, including the requirement that it use excess cash flow to prepay bank debt. RJR reportedly wants to be free to use those funds for product investment or to retire more costly junk bonds.
The company also wants to reduce the interest rate on a $2.25-billion term loan by one percentage point, to 2.5 points over the London interbank offered rate. That would cut annual interest payments by about $20 million a year.
Jason Wright, an RJR spokesman, said the company continually talks to its banks and is always looking for ways to reduce “both the amount of debt and the average cost.”
He declined to comment further.
RJR’s banking group is led by units of Citicorp, Manufacturers Hanover Corp., Chemical Banking Corp. and Bankers Trust New York Corp. Officials from the banking group declined comment or did not return telephone calls.
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