Del Monte expects to raise US$500 million to US$600 million in private placement to tackle debt

[SINGAPORE] Del Monte Pacific could raise between US$500 million and US$600 million in a share placement that the company is exploring, as it races to reduce its debt and address a capital deficit following the collapse of its US business.

The fruit giant is considering an equity raise through a private placement at its unit, Del Monte Philippines Inc (DMPI), according to minutes from its Sep 29 annual general meeting (AGM), released on Monday (Oct 6) evening.

The update follows a September Bloomberg report that the company is mulling an equity raise of up to US$800 million.

Del Monte Pacific, which is dual-listed on the Singapore Exchange and Philippine Stock Exchange, was hit by nearly US$800 million in losses from the bankruptcy of its US business.

Del Monte Pacific still expects to maintain its controlling interest in DMPI after the equity raise, chief financial officer Parag Sachdeva told a shareholder at the AGM.

With the first tranche of the equity raise, Del Monte expects that its debt will be four to five times Ebitda (earnings before interest, taxes, debt and amortisation), the CFO told another shareholder. This would be a reduction from the present debt to Ebitda ratio of seven times.

The company’s management further added that the equity raise would reduce financing costs, replacing higher-interest debt – currently averaging 7 per cent – with equity that carries a lower dividend yield.

Del Monte Pacific is also considering asset disposals to reduce debt, and is engaging with its bankers to “explore options” on loans. “These lender banks have been collaborative, and the management team is working closely with them on the matter,” the minutes indicate.

Investor concerns

One shareholder highlighted that long-term investors suffered substantial losses, and “expressed strong concerns” that the acquisition of the US business led to high debt levels.

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In response, Del Monte Pacific’s chief operating officer Luis Alejandro “acknowledged that the current situation was painful for the management team, and he emphasised the team’s commitment and efforts, stating that they had given their best from the beginning”.

Another shareholder expressed disagreement with the variable bonus paid out to executive directors, in light of the company’s heavy losses.

In response, lead independent director Elaine Lim noted that DMPI delivered strong results, and that the bulk of the variable bonus is attributed to DMPI’s performance.

“She emphasised that the Philippine team has worked hard under challenging conditions and has been fairly compensated. She also stated that, in terms of absolute remuneration, there has been minimal change, reflecting the impact of broader group challenges,” the minutes show.

Del Monte’s Singapore-listed shares ended Monday flat at S$0.092.