Paper cuts

18 June 2003

The Dutch office products group s E746m sale of its paper merchant unit puts worries over its banking covenants to rest. But it chopped off an arm to save its legs: EPS are diluted, interest cover is little changed and it’s highly exposed to the US economy.

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Dutch office supplies group Buhrmann agreed to sell its paper merchanting division to Australia's PaperlinX for E746m on Wednesday.

Buhrmann, which issued a profit warning in May, said it will use E656m of the proceeds to pay down its debt load.

Buhrmann's debt, which totalled E1.7bn at the start of the first quarter of 2003, includes a securitsation, term loans and highyield debt. It will have its first opportunity to pay off onethird of its highyield debt in November 2004.

Australiabased PaperlinX said it will become the world's third largest paper merchant as a result of the acquisition.

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