The sale of Morningstar to Canadian dairy giant Saputo has enabled Dean Foods to reduce its long-term debt by almost a third, according to the Dallas-based dairy giant.
In a document filed with the United States Securities and Exchange Commission yesterday, Dean Foods revealed that it has used cash proceeds from the disposal of its Morningstar division to repay “in full” loans due in 2016 and 2017.
“The Company used the net cash proceeds from the disposition of the Morningstar division (net of estimated taxes and transaction costs) to repay in full its 2016 and 2017 Tranche B term loan,” said the filing.
Saputo completed its $1.45bn acquisition of Dean Foods’ Morningstar dairy division on 3 January 2013. Through the transaction, Saputo hopes to expand its manufacturing and distribution footprint in the US.
Dean Foods repaid $1.019bn of its long-term debt using the proceeds of the deal.
Loans repaid “in full”
The US dairy giant presented the Securities and Exchange Commission with an unaudited pro forma balance sheet for the nine months ending 30 September 2012. The document was adjusted to account for the disposal of Morningstar.
In its original Q3 2012 results, Dean Foods reported long term debt of $3.24bn.
Taking into consideration the proceeds of the Morningstar sale, that figure would have been reduced to $2.23bn, said the Securities and Exchange Commission-filed document.
The firm also adjusted its anticipated interest expense – reducing it from $166.8m to $125.8m.
“As a result of these principal repayments, Dean Foods terminated certain interest rate swaps and wrote-off the deferred financing costs associated with the 2016 and 2017 term loan B,” the filing added.
Fund taxes and expenses?
Following the completion of the deal, Dean Foods vowed to use the proceeds to retire its “remaining senior secured term debt.”
At the time, the firm said that it expected to realize proceeds of approximately $887m following the deduction of taxes and expenses – more than $130m short of the firm’s recent debt repayment.
In its filing, Dean Foods revealed that it may choose to fund a portion of the acquisition costs – freeing up more to repay its long-term liabilities.
“The Company may choose to fund a portion of the taxes, transaction costs and interest rate swap termination costs using borrowings under the Company’s revolving credit facility,” said the filing.