In a move that cuts both ways for its banks, RJR Nabisco Holdings Corp. is expected to shed its "highly leveraged" designation as a result of a debt-reduction program announced Thursday.

The delisting of RJR as a so-called highly leveraged transaction would allow the company's banks to stop classifying some $5.2 billion in loans as HLTs.

The delisting of RJR would, by and large, be a welcome development for its lenders. Because HLT loans are viewed by regulators and investors as risky, banks generally have been trying to reduce their portfolios by whatever means possible.

Loan Rates Would Dip

At the same time, though, RJR's strengthened balance sheet will lead to lower rates on its loans - and that will cut its bank's revenues. RJR could see its interest rates, which now average about 8.25%, shaved by one to two percentage points.

The company's lead banks include the banking units of Citicorp, Bankers Trust New York Corp., Manufacturers Hanover Corp., Security Pacific Corp., Chase Manhattan Corp., Fuji Bank, and Long Term Credit Bank of Japan Ltd.

RJR has already held preliminary talks with the banks on renegotiating its loans on more favorable terms, banking sources said.

The company's banks also helped formulate the debt-reduction plan, sources said.

In Quest of Rates

An RJR spokesman would not comment on the reduction the company is seeking in its interest rate, but a banking source said pricing will come down "very significantly."

RJR has two separate term loans, one priced at 250 basis points over the London interbank offered rate, and the other at Libor plus 350 basis points.

The company pays an average rate of 275 basis points over Libor on the combined debt, according to the company spokesman.

"I think they could get under Libor plus 100 basis points," said one banker.

In addition to lower pricing, the giant food and tobacco company wants the flexibility to use excess cash flow for acquisitions, and to retire high-cost junk bonds, instead of bank debt, as its existing credit agreement requires.

Optimistic Expectations

The company appeared confident Thursday that it will get its way.

In a prepared statement announcing the debt-reduction program, RJR predicted it would be "well positioned" to retire expensive payment-inkind debt in 1993 and 1994.

Under the plan, RJR would offer to swap common stock for $1.8 billion of outstanding convertible preferred stock, and issue $1.88 billion of new preferred stock.

Reduce Existing Debt

Proceeds from the issuance of preferred stock would be used to reduce existing debt, totaling some $17 billion.

That's down from over $29 billion right after the buyout.

At least some of the proceeds will be used to pay off existing bank loans.

RJR will lose its HLT designation because its debt-to-capital ratio will fall from 81% now to around 65%--comfortably below the 75% level that, for regulatory purposes, constitutes a highly leveraged borrower.

Immediately after the $25 billion buyout of RJR in February 1989, the company's debt-to-capital ratio was a staggering 95%.

Rating Agencies Encouraged

Rating agencies responded positively to RJR's planned exchange and preferred stock offerings.

Fitch Investors Service, for example, said it will consider upgrading the company's senior debt to an investment grade rating.

"The overall deleveraging by RJR has been impressive, and we expect this latest step to be successful," said a spokesman for Bankers Trust.

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