Sanderson gets $900 million five-year revolver at Libor plus 125 bps

By Susanna Moon

Chicago, May 4 – Sanderson Farms, Inc. obtained a $900 million five-year unsecured revolving credit facility at an initial interest rate of Libor plus 125 basis points.

Interest on the loans will range from Libor plus 125 bps to 250 bps, based on leverage. The fee is 20 bps to start and ranges from 20 bps to 35 bps after that.

Sanderson entered into the credit agreement on April 28 with BMO Capital Markets, Agfirst Farm Credit Bank, Agstar Financial Services, PCA, Farm Credit Bank of Texas, Farm Credit Services of America, PCA, and Regions Bank, as joint lead arrangers and joint book runners, according to 8-K filing with the Securities and Exchange Commission.

BMO Harris Bank, NA is agent and letter-of-credit issuer. AgFirst Farm Credit Bank, AgStar Financial Services, PCA, Farm Credit Bank of Texas, Farm Credit Services of America, PCA and Regions Bank are the co-documentation agents.

Bank of the West, Farm Credit Mid-America, PCA, 1st Farm Credit Services, PCA, GreenStone Farm Credit Services, ACA, Northwest Farm Credit Services, PCA and United FCS, PCA d/b/a FCS Commercial Finance Group are the co-syndication agents.

Lenders also include U.S. Bank NA, American AgCredit, PCA, Trustmark National Bank, Farm Credit West, PCA and BankPlus.

Sanderson also may increase the commitments under the credit facility or obtain term loans in an amount of at least $25 million for an aggregate amount of any term loans issued of no more than $1.05 billion.

The credit agreement will mature on April 28, 2022.

Up to $30 million of the new credit facility is available for the issue of standby and commercial letters of credit. There is also a $10 million swingline facility that will permit funding of small or late-day draws that reduce available credit under the facility, with the credit risk allocated ratably among the lenders.

The credit agreement contains restrictive covenants, which include maintaining a minimum tangible net worth of $850 million, subject to quarterly increases based in part on the company’s quarterly consolidated net income, a maximum leverage ratio of 50% and a limitation on capital expenditures of $100 million during its fiscal year ending Oct. 31, 2017 and increasing by $5 million during each fiscal year after that through fiscal year 2022, plus up to a $15 million carryover into the fiscal year ending Oct. 31, 2017 for unspent amounts during the fiscal year ended Oct. 31, 2016 and up to a $20 million carryover into the immediately following fiscal year for unspent amounts during any fiscal year ending on or after Oct. 31, 2017 (with special limits to allow for an addition to the Jackson, Mississippi complex in the amount of $15 million, construction of a complex in Tyler, Texas in the amount of $200.5 million, construction of one additional potential further processing complex in the amount of $60 million, construction of a second additional potential complex in the amount of $210 million and up to $70 million for the purchase of up to three new aircraft before Oct. 31, 2020.

The company has a one-time right to increase the maximum leverage ratio by 5% in connection with the construction of either of the three new poultry complexes for the four fiscal quarters beginning on the first day of the fiscal quarter of notice.

Also on April 28 the company terminated its credit agreement dated April 24, 2015 with BMO Harris Bank, NA as agent for a $750 million unsecured revolving credit facility.

Sanderson Farms is a Laurel, Miss., poultry processing company.

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