PAPER AND packaging group, Smurfit Kappa, has raised €250 million from the financial markets that it intends to use to refinance existing commitments and pay off some of its bank debt.

The company said yesterday that it had completed the securitisation of €250 million worth of five-year trade receivables – money that its customers owe to it or will owe to it. Smurfit intends to use the money raised to refinance an existing €210 million securitisation arrangement and to pay off some bank debt.

The Irish group had cut its net debts to €168 million by the end of the third quarter of this year, which in turn meant that its net debt-to-earnings ratio stood at 3.7 at the end of September.

The deal announced yesterday means that it has extended the average time for the repayment of its debts to 5.4 years. None of its borrowings fall due for repayment before December 2013.

Smurfit Kappa chief financial officer Ian Curley said the securitisation deal enhanced its overall financial flexibility. “The group’s financial priority continues to be debt reduction and deleveraging,” he added. Securitisation deals such as this allow companies to borrow money from the financial markets against assets such as revenues from customers.

Smurfit’s price fell in Dublin throughout yesterday despite the announcement, ending over 2 per cent down at €7.3913.

The group is a world leader in paper and packaging with businesses in Europe and Latin America. It recently reported that its earnings before interest, tax and write-offs in the third quarter of the year were €243 million.

Strong cash flow from the business helped to cut its net debt, and its management stressed that it was continuing to focus on the group’s costs. Smurfit generated €128 million in free cash flow during the three-month period.

Its business has been benefiting from higher prices for its products on world markets this year, although some of its input costs have been rising as well.This month, Smurfit said market indices had reported increases of €195 a tonne for containerboard and €250 a tonne for kraftliner.