Listed food company Del Monte Pacific Ltd. said Tuesday that its U.S. subsidiary, Del Monte Foods Inc., completed a new financing arrangement to enhance its liquidity and operational flexibility.
The new financing arrangement sets financial milestones such as the infusion of additional capital and passing financial tests that if not met trigger the appointment of special committees of independent directors to devise new strategies.
Del Monte Pacific said the new financing includes a USD210 million term loan facility provided to Del Monte Foods Corporation II Inc., a subsidiary of Del Monte Foods. It added that the new term facility introduces fresh capital to Del Monte Food, with an additional potential borrowing of up to USD30 million under specific conditions if a parent contribution is not made. The facility, which replaces Del Monte Foods’ prior asset-based facility, aims to boost the company’s liquidity, offering enhanced financial flexibility to meet short-term obligations, fund operational needs, and pursue growth opportunities. The improved capital base is expected to support the effort of Del Monte Foods to capitalize on strategic opportunities and navigate market challenges more effectively. This comes as market conditions in the U.S. are forecasted to improve, providing a more favorable environment for business growth.
The new financial arrangement, which expires in August 2028, includes additional restrictions on assets and operations that cover the group’s ability to incur new debt, grant liens, execute acquisitions or asset sales, and make dividends or other restricted payments. The facility, however, does not impose any financial covenants. If certain financial milestones are not achieved, Del Monte Foods and its intermediate parent company, Del Monte Foods Holdings Ltd., will need to implement governance changes, including forming special committees of independent directors tasked with exploring and implementing strategic alternatives.
The financial milestones include an earnings before interest, taxes, depreciation and amortization test for January 2025 and a required parent contribution of at least USD30 million to Del Monte Foods by January 31, 2025.
These requirements may become obsolete upon the occurrence of certain conditions such as a qualifying refinancing or meeting specific leverage and budget tests.
This strategic financing move is expected to reinforce Del Monte’s position in the U.S. market, ensuring that the company remains well-capitalized to achieve future profitability and growth.
