Jack in the Box, Swift head lower to par levels on mad cow disease news

By Sara Rosenberg

New York, Dec. 24 - Companies like Jack in the Box Inc. and Swift & Co. saw a bit of a backlash in their bank debt levels with quotes moving almost a point lower as investors reacted to the recent mad cow scare in the United States.

"Jack in the Box is par bid, par ½ offered, and it was a 101 name. And Swift, which was also a 101 name is in the par - par ½ kind of range on the mad cow report," a fund manager said.

On Tuesday, Agriculture Secretary Ann M. Veneman announced that the U.S. Department of Agriculture diagnosed a presumptive positive case of bovine spongiform encephalopathy (mad cow disease) in an adult Holstein cow in the state of Washington.

"Despite this finding, we remain confident in the safety of our beef supply," Veneman said in a news release. "The risk to human health from BSE is extremely low."

Jack in the Box, a San Diego restaurant operator, just recently allocated its newest $475 million credit facility (Ba2/BB) on Dec. 18. On its first day in the secondary market the company's $275 million term loan B was seen trading close to 101 throughout the day, and the tranche was quoted with levels at par 7/8 bid, 101 3/8 offered.

Proceeds from the new term loan are being used to refinance the company's existing $150 million term credit facility and redeem its $125 million of 8 3/8% senior subordinated notes due April 15, 2008. The redemption of the notes and the write off of deferred financing fees will result in a pre-tax charge to earnings in the first fiscal quarter of $9 million to $10 million, but borrowing costs will fall by $3 million per year.

The facility, led by Wachovia Securities, also contains a $200 million revolver that will be used for general corporate purposes.

Jack in the Box's new facility is expected to give the company a more flexible capital structure to help it execute its previously announced strategic plan by extending maturities and decreasing borrowing costs.

Swift got its $550 million secured credit facility on Sept. 19, 2002 in connection with its leveraged buyout of ConAgra Foods Inc.'s fresh beef and pork operations through sponsors Hicks, Muse, Tate and Furst.

The company's facility consists of a $350 million revolver with an interest rate of that can range from Libor plus 250 to 350 basis points depending on leverage and a $200 million term loan B with an interest rate of Libor plus 325 basis points.

News of the leveraged buyout had first been released in May 2002, at which time the transaction was expected to close in August 2002. However, following a recall of ConAgra beef, Swift's high-yield offering was postponed, delaying both the completion of the credit facility and the acquisition. Once market conditions improved, a modified bond offering was brought back to market, putting the transaction back on track.

Salomon Smith Barney Inc. and J.P. Morgan Securities Inc. acted as joint lead arrangers and joint bookrunners on the credit facility. Citicorp is the administrative agent and collateral agent, JPMorgan Chase Bank is the syndication agent, and General Electric Capital Corp., U.S. Bank and Rabobank are the co-documentation agents.

As of Aug. 24, the company had total outstanding senior debt of $636.5 million and $198.5 million of secured debt outstanding, with $244.5 million of senior debt available for borrowing under its revolver, according to a filing with the Securities and Exchange Commission.

Swift is a Greeley, Colo., beef and pork products company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.