Bank of America, J.P. Morgan, UBS Warburg and Morgan Stanley will be approaching top-tier institutional lenders of Del Monte this summer ahead of the September retail launch of a new $1.6 billion bank deal. J.P. Morgan and B of A each have taken 30% of the deal, with UBS and Morgan Stanley taking 20% each.
The loan, which will contain a seven-year, $900 million "B" piece, is expected to score big with institutions as it plays into the food sector, bankers said, citing the earnings visibility of the issuer. The deal also consists of a six-year, $450 million revolver and a six-year, $250 million "A" loan. Pricing has not yet been set, but it is expected to range from about 2 1/2 - 3% over LIBOR, one banker noted. He added that a $300 million senior sub note offering also is in the works.
The senior secured credit facility partly refinances existing debt, but the purpose of the transaction is to back the merger of certain businesses with H.J. Heinz into a new Del Monte subsidiary. Heinz has struggled with the brands, which include StarKist seafood, College Inn broth, and its U.S. baby food business, and Del Monte is hoping the brands can be revitalized by focusing on them and leveraging off of its existing infrastructure, one banker explained. The acquisition will add substantial EBITDA to Del Monte, so overall leverage versus EBITDA will actually be reduced, another banker said. The challenge, however, will be revitalizing the product lines, one investor noted. Calls to a company spokeswoman were not returned.