Tyson Foods issues $900 million in new debt and extends $500 million loan
by August 21, 2017 2:08 pm 782 views
Tyson Foods has proposed $900 million in senior unsecured notes, which started being offered on Monday (Aug. 21) and extended a $500 million senior unsecured loan out to 2020.
The company said net proceeds from the bond offering would be used to repay a portion of the company’s $1.8 billion term loan which is due in 2020 and was issued to partially fund the $4.6 billion acquisition of AdvancePierre Foods earlier this year. Tyson said the debt it’s retiring carries an interest rate of 2.38%.
The new bond issue and loan restructure was reported by Tyson Foods in a filings with the U.S. Securities and Exchange Commission on Monday. Tyson Foods CFO Dennis Leatherby said Tyson remains committed to preserving its investment grade rating and will continue to refinance debt as needed to take advantage of better terms.
Moody’s Investor Services assigned Baa2 ratings to the new notes and the restructured term loan. This is a medium grade credit rating for long term corporate bonds and considered investment grade quality. Moody’s also give Tyson Foods a stable outlook rating. The proposed new debt will be offered in 3-year and 4-year tranches, one bearing a floating interest rate and the other bearing a fixed rate.
Moody’s said it would consider downgrading Tyson’s rating if liquidity or operating performance deteriorates.
“Closing leverage for the AdvancePierre acquisition was about 2.8 times debt/ EBITDA, which is high, but tolerable for Tyson’s Baa2 rating. Moody’s expectation through proceeds from pending asset sales, targeted cost synergies and core operating cash flow leverage will decline below 2.5 times by the end of fiscal 2018. Another perk for Tyson from the AdvancePierre deal is earning diversity which should provide scope for a stronger overall credit profile for Tyson overtime,” notes Brian Weddington, senior credit officer for Moody’s.
Moody’s also said it would consider upgrading Tyson’s Baa2 long-term senior unsecured ratings if the company continues to improve business diversity and earnings stability.
“Quantitatively, the ratings could be upgraded if debt/EBITDA is likely to be sustained below 2.0 times and the company maintains combined cash and external liquidity sources of at least $1.5 billion,” Weddington noted.