Utz Brands, a U.S. manufacturer of branded salty snacks, and the company’s subsidiaries Utz Quality Foods (UQF), Kennedy Endeavors and Condor Snack Foods, have entered into a real estate senior secured term loan in the original aggregate principal amount of $88.14 million with City National Bank, as administrative agent (CNB) and each lender from time to time party thereto.
The real estate term loan will be secured by a portfolio of 17 of the borrowers’ owned real estate assets, representing the majority of the borrowers’ real estate assets, including manufacturing plants, warehouses and offices (these assets were previously unencumbered). Proceeds from this strategic financing will be used to pay down in full the outstanding amount under UQF’s revolving credit facility, with excess cash going to the balance sheet.
Pro forma for this transaction, at the end of the second quarter of fiscal 2022 the company’s net leverage remains unchanged and the company’s liquidity, representing cash on hand and available borrowing under UQF’s revolving credit facility, increases to approximately $188 million from approximately $103 million.
The real estate term loan of $88.14 million delivers net proceeds of approximately $85 million after transaction fees and expenses. The real estate term loan has a 10-year maturity and amortizes approximately $3.5 million in principal annually, with a bullet repayment due at maturity. Concurrent with the closing of the real estate term loan, UQF entered into an interest rate swap transaction to fix the effective interest rate at approximately 6%. The real estate term loan contains a single financial maintenance covenant consisting of a fixed charge coverage ratio that is tested quarterly only during a covenant trigger period consistent with UQF’s (and the other affiliates of UQF party thereto) existing ABL credit agreement.
“Amid a rising interest rate environment, this real estate term loan puts in place a low fixed-rate instrument that increases our financial flexibility as we continue to expand distribution and generate strong organic growth,” Ajay Kataria, executive vice president and CFO of Utz, said.
