Research Update: Del Monte Foods Inc. Outlook Revised To Positive From Stable; 'B' Rating Affirmed And Proposed Term Loan Rated

U.S.-based Del Monte Foods Inc. is raising a $525 million term loan due 2029, which, along with an incremental draw on its asset-based lending (ABL) revolver of about $30 million, will refinance its existing high-coupon 11.875% secured notes and cover $55 million in prepayment fees and expenses. The refinancing will generate substantial interest cost savings, which will bolster the company's cash flow in fiscal 2023 onward. We estimate leverage was about 4.2x for the 12 months ended Oct. 31, 2021 as compared with 7.7x for the same prior year period. Pro forma for the proposed transaction, we estimate leverage of about 4.5x for the 12 months ended Oct. 31, 2021 before improving to the 3.5x-4x area by the end of

...- U.S.-based Del Monte Foods Inc. is raising a $525 million term loan due 2029, which, along with an incremental draw on its asset-based lending (ABL) revolver of about $30 million, will refinance its existing high-coupon 11.875% secured notes and cover $55 million in prepayment fees and expenses. - The refinancing will generate substantial interest cost savings, which will bolster the company's cash flow in fiscal 2023 onward. We estimate leverage was about 4.2x for the 12 months ended Oct. 31, 2021 as compared with 7.7x for the same prior year period. Pro forma for the proposed transaction, we estimate leverage of about 4.5x for the 12 months ended Oct. 31, 2021 before improving to the 3.5x-4x area by the end of fiscal 2022. - As a result, we affirmed our 'B' issuer credit rating, and we revised the outlook to positive from stable. We could raise the rating over the next year if the company sustains leverage below 5x and improves its free operating cash flow generation. - We assigned...

Research Update