Landec amended its credit facility with its current syndicate of lenders: JPMorgan Chase, BMO Harris Bank and City National Bank.
“This amendment provides us flexibility and greater liquidity to implement our strategic priorities to improve operating margins at Curation Foods by accelerating investments in cost-out initiatives, while furthering our investments in growth and capacity at Lifecore to meet increasing customer demand,” said Greg Skinner, Landec’s EVP of Finance and CFO.
The amendment increased the credit facility from $205 million to $220 million, consisting of a $120 million term loan and a $100 million revolving credit facility. The $120 million term loan has a three-year term through October 25, 2022 with a 10-year amortization period.
The company intends to hedge virtually all of its outstanding debt resulting in a fixed average interest rate of approximately 1.70% plus a spread based on the company’s leverage ratio which can range from a low of 1.25% to a high of 3.50%. The remaining unhedged portion of the revolving line of credit bears interest at LIBOR plus the spread based on the company’s leverage ratio. The company’s current weighted average interest rate on its debt is approximately 4.95%.
The amendment also increases the company’s maximum leverage ratio from 4.5 to 5.0 for the remainder of fiscal year 2020. The leverage ratio decreases by 25 basis points each subsequent quarter thereafter, beginning in the first quarter of fiscal year 2021, until it reaches 3.5 for the second quarter of fiscal year 2022. There is no change to the fixed coverage ratio of 1.2 or more.
Landec is a provider of diversified health and wellness solutions with two operating businesses: Curation Foods and Lifecore Biomedical. Curation Foods is focused on innovating and distributing plant-based foods with 100% clean ingredients to retail, club and foodservice channels throughout North America. Curation Foods is able to maximize product freshness through its geographically dispersed family of growers, refrigerated supply chain and patented BreatheWay packaging technology.