Smithfield Foods amends loan; increasing size and interest rate

By Sara Rosenberg

New York, April 11 - Smithfield Foods Inc. amended its multi-year credit facility and senior secured note loan agreements, providing for grid-based increases in applicable interest rates (see table 1) and increasing the size to $900 million from $750 million for liquidity purposes and general corporate purposes including acquisitions, according to a filing with the Securities and Exchange Commission.

JPMorgan Chase Bank is the administrative agent on the loan.

Smithfield has not entered into any acquisition agreements, however, the company has expressed interest in a transaction involving assets of Farmland Industries Inc. and its subsidiaries, currently debtors-in-possession in Chapter 11 proceedings.

Furthermore, under the amendment the consolidated leverage ratio covenant was modified (see table 2) and the consolidated interest coverage ratio was changed to no less than 2.50 to 1 before the borrowing release date and no less than 3.00 to 1 after the borrowing release date.

The company "requested the amendments due to continuing unfavorable market conditions and its recent operating result," the filing said.

Smithfield Foods is a Smithfield, Va. pork processor and hog producer.

Table 1: Smithfield Foods' new interest rates

Leverage ratio Libor margin Commitment fee

Greater than or equal to 4.25 to 1 225 bps 30 bps

Less than 4.25 to 1, 3.75 to 1 or more 200 bps 27.5 bps

Less than 3.75 to 1, 3.25 to 1 or more 175 bps 25 bps

Less than 3.25 to 1, 2.75 to 1 or more 150 bps 22.5 bps

Less than 2.75 to 1, 2.00 to 1 or more 125 bps 20 bps

Less than 2.00 to 1 100 bps 17.5 bps

Table 2: Smithfield Foods' new consolidated leverage covenant

Period Maximum ratio

Effective date of amendment through last day of the fiscal quarter ending July 27, 2003 4.50 to 1

Through last day of fiscal quarter ending Oct. 26, 2003 4.00 to 1

After that 3.75 to 1

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