CAMPOS-LED Del Monte Pacific Ltd. (DMPL) said its United States unit, Del Monte Foods, Inc. (DMFI), secured a new financing arrangement of up to $240 million on Aug. 2 to fund short-term obligations and support growth plans.
The arrangement involves a new term loan facility among the applicable lenders and DMFI’s subsidiary, Del Monte Foods Corporation II, Inc. (DMFC), DMPL said in a statement to the stock exchange on Tuesday.
The loan facility provides DMFC with $210 million of first-out new money financing, with the potential for future borrowings worth $30 million under certain circumstances where a parent contribution is not made.
Under the transaction, an asset-based facility was put in place at DMFC similar to DMFI’s prior asset-based facility. The loan will mature in August 2028.
“The new term facility will enhance DMFI’s liquidity by injecting additional capital into the company, thereby improving its ability to meet short-term obligations and fund operational needs more effectively. The increased liquidity will also provide it with the necessary financial flexibility to pursue growth plans and capitalize on strategic opportunities as they arise,” DMPL said.
“Overall, the new term facility will ensure that the US business has adequate financing in place to seize growth opportunities, navigate potential challenges effectively, and drive future profitability, especially as market conditions in the US are anticipated to improve,” it added.
According to DMPL, the loan facility provides for additional restrictions on assets and operations, including the ability of the restricted group to incur indebtedness, grant liens, consummate acquisitions and asset dispositions, and make dividends and other restricted payments.
The company added that the loan facility does not include any financial covenants. However, certain financial requirements must be met, including a minimum earnings before interest, taxes, depreciation, and amortization (EBITDA) test for January 2025 and a parent contribution of at least $30 million to DMFC before January 31, 2025.
“If certain financial milestones are not met, DMFC and Del Monte Foods Holdings Ltd., which is an intermediate parent company of DMFI, will be required to implement certain governance changes, including such boards being required to form special committees comprised of independent directors vested with full authority to explore and implement strategic alternatives,” DMPL said.
“The requirements and implications of such milestones may cease to be effective upon the satisfaction of certain conditions involving a qualifying refinancing, and if applicable, satisfaction of a maximum leverage ratio requirement and compliance with certain budget milestone tests,” it added.
On Tuesday, DMPL shares dropped by 3.06% or 13 centavos to P4.12 per share. — Revin Mikhael D. Ochave
