Aurora Foods bank debt has been stronger this week, with market players quoting the term loan in the 90-91 context up from the high 80s. Reports indicate that the company is getting close to selling off some of its frozen foods businesses. Calls to financial officials at the company were referred to a spokesman, who confirmed that the divestitures are scheduled for the early part of this year but declined to elaborate. Aurora hired J.P. Morgan and Merrill Lynch last summer to aid its divestitures.
All net cash proceeds from any asset sales will be used to repay the bank debt. As of Sept. 30, the company had approximately $670 million of bank debt outstanding. The potential asset sales come at a time when some market players feel the company's liquidity is all but dried up. One dealer noted that the company had received an equity injection last summer but has been burning through cash ever since. Another market player questioned whether or not the company would truly be able to de-lever by selling off its assets or whether the loss of EBITDA would outweigh any reduction in debt. The Aurora spokesman declined to comment on those points.
Last summer, the company received $62.6 million in additional financing through $25 million of senior unsecured promissory notes from entities affiliated with Fenway Partners and McCown De Leeuw & Co. The investors also received warrants from Aurora Foods to purchase 2.1 million shares of common stock at one cent per share.
The remaining $37.6 million of financing was secured through a term loan with conditions identical to that of the company's "B" piece. J.P. Morgan holds the lead role on the loan. Officials from Fenway Partners and McCown De Leeuw & Co. did not return calls for comment.