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Del Monte Foods CFO: Primary use for cash will be debt reduction
By Jennifer Lanning Drey
Savannah, Ga., March 25 - Del Monte Foods Co.'s primary use for its cash flow will be to pay down debt, Larry Bodner, Del Monte's chief financial officer, said Friday during a presentation at the Barclays Capital High Yield Bond and Syndicated Loan Conference in Orlando, Fla.
The company expects to drive cash flow of $150 million to $200 million a year that can be used to repay debt, Bodner said.
Del Monte will also look for merger and acquisition opportunities.
With a moderate increase in EBITDA, the debt reduction should result in a leverage ratio of roughly 4 times in four to five years, Bodner said. The company's leverage ratio was about 6 times at year-end, he said.
Bodner also said that Del Monte's new debt profile following its acquisition by a private investor group provides the company significant financial flexibility. An investor group led by funds affiliated with Kohlberg, Kravis Roberts & Co., LP, Vestar Capital Partners and Centerview Capital LP completed the acquisition of Del Monte in March.
Funding for the acquisition included $1.6 billion of equity from the sponsors, $2.7 billion of long-term loans and $1.3 billion of senior notes. The company also has a $750 million ABL facility that was undrawn at close.
Floating-rate debt includes the $2.7 billion term loan, which has an interest rate of Libor plus 300 basis points.
"We're comfortable with the floating rate debt position given, frankly, the relative flatness of the Libor curve for quite some time," Bodner noted.
Del Monte Foods is a San Francisco-based branded pet and consumer products company.
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