Greencore borrows €259m in private placement

Publicly-quoted Greencore yesterday announced that it had borrowed $302 million (€258.6 million) from nine US insurance companies.

The Irish food company said it had completed a private placement of loan notes repayable over seven, 10 and 12 years, with the American institutions.

The notes were issued in dollars and sterling. They have an average maturity of nine years, and the interest rates are 5.47 per cent for the dollar component of the debt, and 5.76 per cent for the sterling-denominated notes.

Commenting on the deal last night, Greencore finance director Mr Patrick Kennedy described the interest rates as "exceptionally competitive", and said that, 12 months ago, the same financing arrangement would have cost 0.5 per cent more.

Mr Kennedy explained that the US private long-term loan market was competitive because of a huge gap between supply and demand. "There is something like $75 billion available, while there is demand for just $25 to $30 billion," he said.

Greencore's placement was almost three times over-subscribed. The group originally sought $150 million, and was offered more than $400 million. Mr Kennedy said the availability of the cash and the attractive terms on offer convinced the group to increase the value of the placing.

The money will be used to repay existing bank borrowings. As it is debt, the deal will not make any difference to group's balance sheet, while there will be only a marginal gap between the interest payable to its current lenders, and that which will be used to service the loan notes, Mr Kennedy said.

"It will not change the quantum of debt - the advantage is the much longer repayment period," he said. "This gives us stability in our capital structure and also a new source of funding."

Mr Kennedy said that Greencore borrowed €328 million for Hazlewood Foods in the UK in early 2001. Since then it had been working to improve its credit profile to allow it to raise cash through the private placement of loan notes.

He added that it was group strategy to have some of its finances structured in that way over the long term.

"The completion of this financing is an important step in securing for Greencore a capital structure that will support the continued development of the group," he said.

As the placement was private, Greencore did not need a credit rating from Standard & Poor's (S&P) or Moody's. The deal will not make any difference to the company's reporting requirements.