Dimon, the world's second largest dealer of leaf tobacco, has obtained a waiver from its bank group on the fixed charge covenant in its credit facility, but Moody's Investors Service is still concerned that the company may not meet one of several covenants in the near future. Wachovia Securities is the lead on the three-year, $150 million credit agreement, which was put in place last year.
A Dimon spokesman declined comment, but in the company's recently announced annual results, the Danville, Va.-based company, states that as a consequence of weak financial results it was unable to remain in compliance with the consolidated fixed charge coverage ratio covenant in the credit facility. A source said that the covenants are not expected to be a problem going forward, as the levels have been reset, but he acknowledged that it is the second time Dimon has needed a waiver.
The company's financial performance has significantly deteriorated, Moody's notes. The rating agency has put the Ba3 rating on the bank debt and $200 million of senior notes, on review for downgrade. Dimon's last 12-month retained cash flow minus capital expenditures, has been negative $19 million, compared to an already weak $0 million at the end of the second quarter, Moody's adds. The review will focus on current dynamics for the industry. The pricing on the loan is linked to the credit rating.
* Moody's, meanwhile, upgraded the bank debt ratings of dj Orthopedics from B1 to Ba3. The company has a $100 million senior secured term loan and a $30 million revolver. The bank debt was put in place to finance the November 2003 acquisition of Regentek, the bone growth stimulation business of OrthoLogic Corp. Moody's based its action on the company's successful restructuring and performance improvement plan initiated in 2002 and the successful initial integration of the bone growth stimulation business and the prospects for further improvement; and the faster than anticipated permanent debt reduction brought about by the use of cash and equity.