Del Monte launched its long-awaited financing deal to its broader group of lenders over the weekend, outlining that it raised $240mn of new money backstopped by an ad hoc group of term loan lenders, sources tell LFI.
The new money will take the form of a first-out super-priority first-lien term loan facility under newly formed subsidiary Del Monte Foods Corporation II Inc., sources said. All existing lenders can participate in the SOFR+ 800 (0.5% floor) first-out new money tranche due August 2028 on a pro rata basis though a syndication process, they noted.
Non ad hoc group members that choose to participate in the new-money deal will collect a 4% upfront PIK premium and will be allowed to roll up roughly 30.5% of their existing term loan claims into an S+ 425 (0.5% floor) second-out tranche at par under the new term loan facility capped at $500mn, sources continued. The remaining claims of participating lenders will funnel into a $213mn S+ 325 cash plus 150bps PIK (0.5% floor) third-out tranche at par, they added.
Ad hoc group lenders, meanwhile, will be able to roll up 100% of their existing term loan claims into the second-out tranche for backstopping the new money, sources said.
Lenders that elect not to participate in the new-money financing deal will have the option to participate in an open market purchase of their term loans at par into the third-out TL tranche. A participation deadline is set for August 12, sources noted.
Its original $600mn (S+425, 0.5%) term loan due 2029 is quoted 74.9-77 today, down from the low 90s in early March, according to Markit.
Proceeds from the new money deal will fund a paydown of Del Monte’s ABL so that the issuer is in compliance with its lower borrowing base, sources went on. The financing will also fund working capital requirements and repay past due vendor trade payables.
As part of the deal, $30mn of the $240mn will be funded into an escrow account, with the parent company providing $30mn of new equity by August 31 and those parent company funds paying down the $240mn new-money financing. If the company’s parent does not provide the contribution by the end of the month, the $30mn will convert into first-out debt, with 50bps PIK per annum interest added each month at a 300bps PIK cap, sources said.
Del Monte engaged legal counsel Kramer Levin earlier this year amid a liquidity crunch, as LFI reported. For their part, lenders organized into an ad hoc group with Houlihan and Gibson Dunn after the food provider posted two consecutive weak earnings reports, including a 73% year-over-year EBITDA swoon in fiscal Q3 2024 to $12mn, amid volume and inflationary headwinds.
The company’s advisor, PJT, is to go over the transaction during a call with lenders this afternoon.
Calls to the company and PJT were not returned.
Hema Oza
hema.oza@levfininsights.com
Mobile: +1 917 841 0563
Erica Carnevalli
erica.carnevalli@levfininsights.com
Mobile: +1 917 770 6402
