DOW JONES NEWSWIRES
Smithfield Foods Inc. (SFD) entered credit pacts and completed a
note offering, key moves aimed at giving the meat processor more
financial flexibility to weather the economic downturn.
The company entered a $1 billion credit facility, closed a $625
million note offering and entered a new $200 million term loan with
Rabobank Nederland that pushes back a big maturity by two
years.
Smithfield has also been hurt by a slide in hog price slides
after the H1N1 flu scare erupted in April, though the flu can't be
caught from eating pork. The company has already cut jobs, closed
plants and reduced its herd amid an industrywide softening of
once-booming export demand. The company had its first annual loss
in three decades in 2008.
"We believe these actions will enable us to weather the current
economic environment and the results of our hog production segment,
which we expect to begin to improve in the second half of fiscal
2010," said President and Chief Executive C. Larry Pope.
Smithfield last week increased the size of the note offering
from the initially planned $500 million. The company a week ago
also disclosed it was in talks for the new asset-backed credit
facility. Smithfield will pay 10% interest on the notes, which
priced at a little over 96 cents on the dollar.
The credit line, which is backed by essentially all of the
company's U.S. units, includes an option to boost available credit
to $1.3 billion. The line, along with the planned refinancing of a
European revolver, will significantly reduce financial-covenant
risks, said Smithfield.
The new $200 million term loan replaces an earlier one of the
same amount, but the maturity is pushed back to August 2013 from
August 2011.
Shares of the company recently traded down 1.3% at $13.95 amid a
broad market sell-off. The stock has more than doubled in value
since late November but remains down almost half in the past 11
months.
-By Jay Miller, Dow Jones Newswires; 212-416-2355;
jay.miller@dowjones.com