Sensing a tightening bank market, DIMON opted to mix up its financing between bank debt and bonds when it went out to the market this year to refinance its $250 million credit. The company closed a smaller-sized bank deal, reducing its revolver to $125 million and extending the maturity to three years from two years. The company also closed a $200 million note offering. The bank deal closed on Oct. 30. Ritchie Bond, senior v.p. and treasurer, explained why the bond deal was an integral part of the refinancing. "In this environment, the availability of commercial bank credit continues to contract. We wanted to stay ahead of that curve. By accessing funds through the bond issuance, we've been able to better secure long-term financial liquidity for DIMON." The Danville, Va.-based company is a worldwide dealer of leaf tobacco.
Bond further explained the strategic nature of the refinancing. "The real driver behind the refinancing was a strategic move to reduce DIMON's dependence on short-term uncommitted bank facilities. Through the combined bond and syndicated bank deal, we have extended the average maturity of our debt portfolio from 3.2 years to 6.4 years," he said.
First Union and Deutsche Bank are the lead arrangers. The company went out to bid since original lender, Bank of America, opted not to continue doing business with the tobacco company. Some banks have concerns about financing tobacco deals, either for political or liability reasons, he said, but Bond explained it is important that potential investors understand the company is an agricultural processor and not a manufacturer of consumer tobacco products. "We have never been a party to any tobacco litigation, he said." Eloise Hale, spokeswoman, clarified Bank of America's position on doing work with tobacco companies. "We have low exposure to it, but we do [finance tobacco deals]," she said, adding, "We haven't changed our philosophy."