B&G Foods modifies dividend payout structure of income securities

By Paul A. Harris

St. Louis, Oct. 6 - B&G Foods Holdings Corp. announced changes in the dividend-payment structure of its approximately 20.8 million of Enhanced Income Securities (EIS) now in the market in a move that appears to cushion the company as well as investors in its new income securities.

A key provision specifies a $6 million cash holdback requirement that must be met before dividends can be paid to holders of the company's class B shares, which are not part of the EIS deal.

The move serves to subordinate the class B shares relative the rest of the company's capital structure, a source close to the deal told Prospect News.

The modifications appeared in an amended S-1 document that the company filed with the U.S. Securities and Exchange Commission on Tuesday.

The EIS are comprised of 20.8 million shares of class A common stock and senior subordinated notes due 2016.

In addition to the cash flow holdback the new structure specifies that dividend payouts to holders of class A shares must be subtracted from "available cash," before the dividend payments to class B shareholders are calculated.

The filing further specifies that in order to make full dividend payments to class B shareholders the company's EBITDA for the 12 months ending Dec. 31, 2005 would need to be at least $78.9 million. "We expect our EBITDA for the twelve months ended Dec. 31, 2005 will be less than that amount and consequently we do not expect to pay class B dividends at the maximum permitted amount," the company stated in the filing.

RBC Capital Markets, Credit Suisse First Boston and Merrill Lynch & Co. are the bookrunners for the EIS deal.

B&G Foods, a Parsippany, N.J.-based food company, is also in the market with a separate $200 million offering of seven-year senior notes (B2/B) via Lehman Brothers. Price talk is 8% to 8¼%.

The offering is coming concurrently with the EIS issue, and pricing of the bond deal is contingent upon the successful completion of the EIS transaction.

Both deals could price as early as Wednesday night, according to an informed source. However, the source added, the transaction is more likely to occur later in the week.

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