ContiGroup/Smithfield joint venture seeking $550 million revolver

By Sara Rosenberg

New York, March 31 - The proposed 50/50 joint venture cattle feeding business to be formed by ContiBeef LLC, a subsidiary of ContiGroup Cos. Inc., and MF Cattle Feeding Inc., a recently acquired subsidiary of Smithfield Foods Inc., is in-market with a $550 million five-year revolving credit facility, according to a market source.

Rabobank International is the sole lead bank on the deal.

The revolver will carry an initial interest rate of Libor plus 175 basis points for the first six months and then the rate will be based on a grid tied to debt to capital, the source said.

The syndicate is asking for $20 million commitments, and an upfront fee of 15 basis points will be paid on allocation.

"Seven institutions were invited in the first stage of the transaction months ago," the source said. "All of them came in.

"[Wednesday] was the general meeting in which five new institutions looked at the transaction and all of them [are expected] to come in."

So, all in all, the syndicate is expected to be comprised of a total of 12 banks, excluding Rabobank.

Commitments are due April 14, and closing is targeted for April 21.

In addition to the credit facility, financing for the venture will also be provided through equity investments by ContiGroup and Smithfield.

The new Boulder, Colo.-based joint venture, whose name has yet to be determined, will include all six feedyards currently owned by ContiBeef and the four feedyards owned by Smithfield since October 2004. It will be a stand-alone operating company, independent from both ContiGroup and Smithfield.

The transaction is subject to regulatory approval and execution of a definitive agreement.

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