Campbell Soup to keep cutting debt with funds from $1 billion notes

By Devika Patel

Knoxville, Tenn., June 3 – Campbell Soup Co. used the funds from a $1 billion notes sale to pay off $300 million of bank debt and will use the remaining proceeds from the notes offering to reduce debt further.

The company’s leverage ratio, which represents net debt to trailing 12-month adjusted EBITDA from continuing operations, was 3.2x at the end of the last quarter.

Long-term debt was $5,191,000,000 as of April 26, 2020, compared to $7.5 billion as of April 28, 2019.

“[Prior to last quarter] we had made significant progress to de-lever our balance sheet,” executive vice president and chief financial officer Mick Beekhuizen said on the company’s third quarter ended April 26 earnings conference call on Wednesday.

“Proceeds from completed divestitures along with positive cash flow generated by the business were used to reduce our debt,” he said.

The company settled a $1 billion notes sale and subsequently paid down $300 million of bank debt, with plans to reduce debt even more.

“In April, we raised $1 billion through the issuance of 10- and 30-year bonds,” Beekhuizen said.

“In early May, we repaid the $300 million which was outstanding on our revolver and while we currently have an increased cash balance, we plan to utilize these proceeds to reduce a portion of our outstanding debt,” he said.

Cash and cash equivalents were $1,242,000,000 as of April 26, 2020, compared to $206 million as of April 28, 2019.

“We are comfortable with our overall liquidity position in light of the increased cash balance combined with the highly cash-generative nature of our business,” Beekhuizen said.

On April 20, the company priced a $1 billion issue of notes (Baa2/BBB-/BBB) in two tranches.

The company sold $500 million of 2.375% 10-year notes at a spread of Treasuries plus 175 basis points. These notes priced at 99.991 to yield 2.376%.

Initial talk was in the Treasuries plus 210 bps area with guidance tightened to the 180 bps spread area, plus or minus 5 bps.

A $500 million tranche of 3.125% 30-year notes was sold at a spread of 190 bps over Treasuries. These notes priced at 99.729 to yield 3.139%.

The 30-year notes were talked at the 215 bps spread area and guided to print at the Treasuries plus 195 bps area, plus or minus 5 bps.

Barclays, BofA Securities, Inc., Citigroup Global Markets Inc., J.P. Morgan Securities LLC, BNP Paribas Securities Corp. and Credit Suisse Securities (USA) LLC were the bookrunners.

Proceeds were earmarked to repay debt under the company’s revolving credit facility, to repay commercial paper and for general corporate purposes.

Campbell Soup is a convenience foods company based in Camden, N.J.

© 2015 Prospect News.
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