Seminis issued $140 million in bonds and reduced its $250 million credit facility in order to take advantage of the robust market conditions offering low fixed rates and flexibility, explained Bernardo Jimenez, cfo. The company used the proceeds from the 101/4% senior subordinated notes to modify its credit facility, increasing the amount available on the revolver from $60 million to $75 million and decreasing the term loan "B" from $190 million to $90 million.
While net debt remains essentially unchanged, Seminis benefits when rates begin to rise because it has reduced its floating rate debt relative to its fixed rate debt. The increased interest expense is mitigated by the decreased mandatory principal payments on the term "B" and 1% reduction to the spread on both the "B" and the revolver, explained Jimenez. The revolver is now priced at LIBOR plus 2% and the term loan is priced at LIBOR plus 21/4%. By increasing the revolver, the company also gains extra liquidity. Moreover, Seminis has gained the flexibility to move its cash around in the company, to complete acquisitions, and its subsidiaries can issue debt.
Citigroup leads the bank facility and Harris Nesbitt, CIBC World Markets and Rabobank participate. Jimenez said the bank group remained the same through these recent tweaks except for one lender that bowed out. He declined to name the bank, but explained that the lender said as a matter of policy it cannot participate in deals that have the flexibility to do acquisitions without getting approval from the bank group. Seminis initially refinanced its debt structure after coming out of a restructuring period in September of last year (LMW, 9/29). At that time, Seminis also completed a $190 million senior subordinated note issue in addition to the credit facility.