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Del Monte warns of Q2 loss, may refinance US$1.4b in loans

LOSS-MAKING food and beverage player Del Monte Pacific is evaluating options to potentially refinance its US subsidiary’s loan facilities of about US$1.4 billion.

The subsidiary, Del Monte Foods Inc (DMFI), has loans comprising a US$442.5 million asset-based facility due in November 2020, a US$670 million first-lien term loan due in February 2021, and a US$260 million second-lien term loan due in August 2021.

The group has been supporting DMFI’s capital structure requirements and deleveraging efforts, including the purchase in the last 20 months of about US$231 million of the second-lien term loan, Del Monte said in a bourse filing on Tuesday morning.

Del Monte also said it expects to report a loss for Q2 FY2020 ending October 2019, as a result of one-off expenses.

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The group had earlier swung to a net loss of US$38.3 million for Q1 ended July 31, against a profit of US$3 million a year ago.

On Tuesday, Del Monte also provided an update on DMFI’s “asset-light strategy” first announced in August this year.

Under the strategy, DMFI is making divestments at four production facilities in the US.

The first, in Cambria, Wisconsin, has been sold and transitioned, with its related employees, to Seneca Foods Corporation on Nov 1, Del Monte said on Tuesday. This was sold as an operating facility.

Two others, located at Sleepy Eye in Minnesota and at Mendota in Illinois, are expected to be closed and sold during Q4 FY2020 ending April 2020. DMFI has entered into an agreement to sell both facilities.

For the fourth production facility in Crystal City, Texas, DMFI has sold equipment and is considering other proposals to sell the remaining manufacturing assets there.

Shares of Del Monte closed at 14.3 Singapore cents on Monday, up 0.2 cent or 1.4 per cent.