The Campos family’s Del Monte Pacific Ltd., maker of canned fruits, vegetables and snacks, obtained a debt lifeline for its US subsidiary, Del Monte Foods, to meet short-term loan payments.
Del Monte Foods secured a new financing deal worth $210 million on top of potential borrowings of $30 million, a stock exchange filing on Tuesday showed.
The group, led by CEO Joselito Campos Jr., will not face traditional debt covenants but will need to meet profit targets moving forward.
If it fails, it will have to implement governance changes, such as forming special committees of independent directors. These committees will have full authority to explore and implement strategic alternatives.
Loan terms
These profit milestones include an earnings before interest, taxes, depreciation, and amortization check for next year and a parent contribution of at least $30 million to Del Monte Foods Corp. II by Jan. 31, 2025.
These requirements may be lifted if certain conditions are met, such as qualifying refinancing and meeting maximum leverage and budget milestone tests.
The debt facility matures in Aug. 2028.
Big picture
Del Monte Foods, which accounts for about 70 percent of Del Monte Pacific’s sales, was downgraded last January by debt watcher S&P due to its significant financial underperformance.
As of April 30, 2024, the group’s current liabilities exceeded its current assets by $417.3 million, mainly due to long-term loans maturing within the next 12 months.
This debt deal allows the company to support short-term obligations and operational requirements.
Management’s view
“Overall, the new term facility will ensure that the US business has adequate financing in place to seize growth opportunities, navigate potential challenges effectively and drive future profitability especially as market conditions in the U.S. are anticipated to improve,” Del Monte Pacific said in a stock exchange filing.
Losses
Del Monte Pacific swung to a $127.3 million loss in its fiscal year 2024 versus a profit of $17 million the previous year due to higher costs and inventory losses alongside stagnant sales.
Del Monte Pacific is planning to sell select assets, form strategic partnerships, and implement workforce reductions to cut costs.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
