International Paper Becomes Guarantor for DS Smith Notes

International Paper Co (NYSE:IP), a $26.1 billion market cap paper and packaging giant with annual revenues exceeding $18.6 billion, has officially become the guarantor for its subsidiary DS Smith Limited’s outstanding notes, as disclosed in a recent SEC filing. According to InvestingPro data, the company maintains a FAIR financial health score, with analysts expecting both sales and net income growth this year. On Monday, the company announced the successful passing of Extraordinary Resolutions during separate meetings held with note holders, resulting in the approval of amendments to the terms and conditions of the notes.

The amendments include removing the obligation for DS Smith to prepare consolidated accounts and modifying certain default events to better align with International Paper’s debt securities provisions. These changes, intended to grant DS Smith more flexibility within the International Paper group, were proposed alongside a guarantee from International Paper for DS Smith’s payment obligations under the notes. The company’s strong financial position is evidenced by its healthy current ratio of 1.51 and impressive 55-year track record of consecutive dividend payments, as highlighted by InvestingPro analysis.

The notes in question are part of DS Smith’s Euro-Medium Term Note Programme and include €600 million 0.875% notes due 2026, €850 million 4.375% notes due 2027, £250 million 2.875% notes due 2029, and €650 million 4.500% notes due 2030. As of the date of the report, the full principal amount of each series of notes remains outstanding.

Following the approval of the proposed amendments, DS Smith executed and delivered a Supplemental Trust Deed for each series to implement the changes. Concurrently, International Paper executed and delivered deeds of guarantee for each series, officially taking on the role of guarantor as of March 10, 2025.

Investors and stakeholders were informed of these developments through the 8-K filing with the Securities and Exchange Commission dated March 11, 2025. The filing includes the deeds of guarantee for each series of notes, providing legal assurance for DS Smith’s payment obligations.

This strategic move is part of International Paper’s broader efforts to streamline operations and financial structures within its group of companies. The information regarding this transaction is based solely on the press release statement provided in the SEC filing. With an EV/EBITDA of 15.15 and current trading levels slightly above InvestingPro’s Fair Value estimate, investors seeking deeper insights can access comprehensive analysis and 10+ additional ProTips through InvestingPro’s detailed research reports, available for over 1,400 US stocks including International Paper.

In other recent news, International Paper has announced the permanent shutdown of four U.S. facilities, impacting 674 employees. This strategic move, part of the company’s transformation plan, will reduce its annual containerboard capacity by approximately 800,000 tons. Concurrently, Citi analysts have reinstated coverage on International Paper with a Buy rating and a price target of $60, highlighting potential earnings growth driven by cost reductions and synergies from the DS Smith acquisition. The company’s EBITDA is projected to reach $3.7 billion by 2025, with further growth expected as cost savings goals are met. Following the acquisition of DS Smith, S&P Global Ratings upgraded DS Smith’s credit ratings to match those of International Paper, reflecting a stable outlook. Additionally, International Paper has appointed David Robbie to its Board of Directors, leveraging his financial expertise and experience with DS Smith. The company also released a Third Supplementary Prospectus related to its DS Smith acquisition, providing additional information for investors regarding stock trading in the U.K. International Paper reported net sales of $18.6 billion for 2024, demonstrating its significant presence in the packaging industry.

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