Fitch Changes Dole’s Rating Watch to Positive
Fitch Ratings has changed the Rating Watch on Dole Food Co., Inc. and Solvest, Ltd. – Dole’s wholly owned subsidiary – to positive from negative.
The affected ratings are as follows:
Dole (Operating Company) – Long-term Issuer Default Rating (IDR) B+; – asset-based (ABL) revolver due 2016 BB+/RR1; – secured term loan B due 2018 BB+/RR1; — 13.875% third lien notes due 2014 BB/RR2; -8% third lien notes due 2016 BB/RR2; – 8.75% senior unsecured notes due 2013 B-/RR6.
Solvest Ltd. (Bermuda-Based Subsidiary) – Long-term IDR B+; – secured term loan C due 2018 BB+/RR1.
At June 16, 2012, Dole had $1.6 billion of total debt.
Rating Rationale and Triggers: On Sept. 17, 2012, Dole announced that it had signed a definitive agreement to sell its worldwide packaged foods and Asia fresh produce business to ITOCHU Corp. for $1.685 billion in cash. The transaction is expected to close by year-end following customary regulatory approvals in multiple countries. Combined revenue and EBITDA, excluding corporate overhead, for these businesses was roughly $2.5 billion and $190 million during 2011, respectively, translating to a transaction multiple of 8.9x.
Dole further announced that it will use the majority of the proceeds, net of about $300 million of cash cost associated with the deal and subsequent restructuring, to pay off debt. In connection with the transaction, Dole will recapitalize its debt structure, with any new debt issued on more favorable terms and being biased towards term loans.
The Positive Rating Watch indicates that there is heightened probability of an upgrade with the ultimate outcome dependent on Dole’s post recapitalization capital structure and leverage. Timing of the recapitalization is uncertain and Dole has not committed to final debt levels or what cash proceeds will be used for but Fitch believes shareholder payouts are possible.
Pro forma for the divestiture, Dole will have approximately $4.2 billion revenue and $246 million of EBITDA including the $50 million of cost savings mentioned above but the company will be less diversified. Capital expenditures could approximate $41 million and net interest expense, should the company pay off all but about $260 million of its debt and prior to any additional debt incurrence associated with the recapitalization, could be about $16 million.
To read the Fitch release in its entirety, click here.
Previously on abfjournal.com: