Darling debt ratio climbs to 3.19x in Q1 after $1.2 billion purchase

By Devika Patel

Knoxville, Tenn., May 11 – Darling Ingredients Inc. increased its leverage ratio to 3.19x from 2.54x and enlarged its long-term debt levels up by over $1 billion last quarter in connection with an acquisition that closed on March 31.

On Oct. 18, 2022, the company announced it planned to buy Gelnex, a producer of collagen products, for approximately $1.2 billion in cash.

“The company's total debt outstanding at first quarter 2023 was $4.7 billion after the Gelnex acquisition as compared to $3.4 billion at fiscal year-end 2022,” executive vice president and chief financial officer Brad Phillips said on the company’s first quarter ended April 1 earnings conference call on Wednesday.

“In conjunction with the Gelnex funding, we entered into a three-year interest rate swap to fix $600 million of floating-rate debt at an average swap rate of 3.78% and also entered into a two-year cross currency swap of $557 million to hedge a euro intercompany loan, which synthetically converted U.S. debt to Euro debt and reduced the interest rate by 1.2%,” he said.

Long-term debt, net of current portion, was $4,558,632,000 as of April 1, 2023, compared to $3,314,969,000 as of Dec. 31, 2022.

Current portion of long-term debt was $118,804,000 as of April 1, 2023, compared to $69,846,000 as of Dec. 31, 2022.

As previously reported, management said in March that it plans to bring the company’s leverage down to 2.75x by the end of 2023. The leverage ratio rose significantly in the first quarter due to the acquisition.

“Our bank coverage leverage ratio at the end of the first quarter was 3.19x as compared to 2.54x at fiscal year-end 2022,” Phillips said.

Cash and cash equivalents were $132,572,000 as of April 1, 2023, compared to $127,016,000 as of Dec. 31, 2022.

“We continue to maintain strong liquidity, with $866 million available on our revolving credit facility as of quarter end,” Phillips said.

Combined adjusted EBITDA for the first quarter 2023 was $418.4 million, compared to $330.7 million for the same period in 2022.

Darling is an Irving, Texas-based developer and producer of sustainable natural ingredients from edible and inedible bio-nutrients.

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