RJR Retires $2.4 Billion in Junk Bonds

Moving to cut its massive debt, which was incurred in the biggest leveraged buyout in history, RJR Nabisco Holdings Corp. said Thursday that it has retired $2.4 billion in junk bonds by swapping them for cash and stock.

RJR said the swap--part of a $6.9-billion recapitalization program launched in July--gave bondholders cash and stock in the company in exchange for the bonds they traded in.

The mountain of debt was incurred in the $25-billion leveraged buyout that was completed early last year.

By retiring the bonds now, the privately held company avoids a steep increase in interest rates that was to take effect in April. Instead, Kohlberg Kravis Roberts & Co., the major equity holder in RJR Nabisco, obtained fresh bank loans in July to lower its debt and increase equity.

RJR Nabisco Holdings is the parent of RJR Nabisco Inc., the tobacco and food conglomerate.

Since RJR Nabisco was taken private after a takeover battle that began in late 1988, the junk bond market that made the deal possible has fallen precipitously.

In its most recent quarter, RJR paid interest expenses of $845 million, compared to $983 million in last year’s third quarter.