Smithfield gets more covenant relief through €300 million revolver amendment

By Susanna Moon

Chicago, Feb. 13 - Smithfield Foods, Inc. entered into an amendment to its €300 million secured revolving credit facility, according to an 8-K filed Friday with the Securities and Exchange Commission.

The amendment includes the following revisions:

• A reduction of the interest coverage ratio covenant for specified periods as set forth in greater detail below;

• A revision of the asset coverage ratio to require a ratio of certain of the company's assets to the total outstanding loans under the euro credit facility to be at or above 1.75 to 1;

• The pledge of additional shares of Campofrio Alimentacion SA not previously securing the euro credit facility;

• The pledge of some accounts receivable and inventory of the company's Romanian and Polish subsidiaries;

• An increase in the applicable rates for borrowing and commitment fees; and

• A borrowing base that will limit borrowing as a function of the assigned values of the pledged Campofrio shares and the Polish and Romanian accounts receivable and inventory.

Under the amendment, the interest coverage ratio will be 1.6 to 1 for the fiscal quarter ending 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 to 1 for the fiscal quarter ending Jan. 31, 2010. Under the original terms, the ratio will return to 3 to 1 for the fiscal quarter ending May 2, 2010 and thereafter.

As a result of the amendment and the third amendment of the company's U.S. credit facility, which was previously reported in an 8-K filing with the SEC on Feb. 6, the company expects annual interest expense to increase by $20 million to $25 million. The company incurred fees and expenses associated with the two amendments totaling about $12 million.

Based in Smithfield, Va., Smithfield Foods is a meat processing and packaging company.

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