Canadian pet food maker Menu Foods has scored a fully-underwritten credit facility that it plans to use to repay all its existing debt.
The Toronto company, which makes private-label “wet” pet foods for U.S. and Canadian retail chains, on Wednesday announced an agreement with its banker for provision of US$105 million of credit facilities, expected to close on or around March 31.
The credit facilities, due to mature three years from the date of closing, are composed entirely of senior debt, to include a US$30 million revolving term facility and US$75 million non-revolving term facility.
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The new credit facilities are expected to reduce Menu’s cost of borrowing by about $2 million per year, CEO Paul Henderson said in a release.
“It is rare in today’s credit markets to be able to obtain a fully underwritten credit facility,” he said. “This is a testament to the underlying strength of Menu’s business and to its management team that the lender who knows Menu the best would make such a commitment.”
The new credit facilities put Menu in an “excellent position to continue the rebuilding process which began in 2007 and to take advantage of opportunities that may present themselves in the future,” he said.
The “rebuilding” to which Henderson referred follows a major product recall by Menu and several pet food makers, starting in spring 2007 following a scandal in China over tainted wheat gluten supplied to western pet food processors.
Menu later set up a US$24 million fund to settle over 100 proposed class action lawsuits stemming from the recall.
In Menu’s case, the recall began in March 2007, stemming from indications that some Menu-made cuts-and-gravy dog and cat foods may have affected the renal health of some animals in the U.S.
Menu said a Chinese supplier of gluten, a protein ingredient used in many pet foods, had spiked its ingredients with melamine and other compounds to “artificially inflate” protein levels.
