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Smithfield Foods secures covenant relief through $1.3 billion revolver amendment
By Caroline Salls
Pittsburgh, Feb. 6 - Smithfield Foods, Inc. has entered into an amendment to its $1.3 billion secured revolving credit facility, according to an 8-K filed Friday with the Securities and Exchange Commission.
The amendment includes a reduction of the interest coverage ratio covenant; a revision of the inventory and receivables ratio coverage covenant; an increase in the applicable rates for borrowings and commitment fees; elimination of the ability to borrow based on the offered rate for overnight federal funds; and an agreement to deliver a deed of trust for subsidiary the Smithfield Packing Co., Inc.'s Tar Heel pork processing plant within 30 days of Feb. 2.
Specifically under the amendment, the interest coverage ratio will 1.6 to 1 for the fiscal quarter ended Feb. 1; 1.2 to 1 for the fiscal quarter ending May 3; 1.35 to 1 for the fiscal quarters ending Aug. 2 and Nov. 1, 2009; and 2.0 to 1 for the fiscal quarter ending Jan. 31, 2010.
In accordance with the original terms of the credit facility, the ratio will return to 3.0 to 1 for the fiscal quarter ending May 2, 2010 and thereafter.
Also under the amendment, the inventory and receivables ratio coverage covenant was amended to require a ratio of the sum of 65% of the total amount of inventory plus 85% of the total amount of accounts receivable to the revolving credit exposure under the credit facility and other equal debt to be at or above 1.3 to 1.
The company said it is also in discussions regarding similar covenant relief with the lenders under its €300 million secured revolving credit facility.
Based in Smithfield, Va., Smithfield Foods is a meat processing and packaging company.
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