H.J. Heinz, the ketchup-maker owned by Warren Buffett’s Berkshire Hathaway and 3G Capital, sold $2 billion in bonds to repay a portion of its term loans, the company said in a statement.
The ten-year second-lien notes were sold at par to yield 4.875 per cent, according to data compiled by Bloomberg. Heinz was purchased by Berkshire Hathaway and 3G for $23 billion in June 2013.
The yield was less than the 7.49-per-cent average for 32 second-lien bonds with similar ratings, Bloomberg data shows. Those securities represent about $13 billion outstanding that has been issued since 1999.
“Heinz is a household name with a tremendous history, stable products. They have been cutting costs, and in the end, there is a Buffett premium priced in that helped the deal,” said Matthew Duch, a money manager at Calvert Investments in Bethesda, Maryland, which oversees more than $13 billion in assets. “The pricing was fair, and people are going in looking to park cash here.”
Heinz lined up more than $14 billion in financing as a part of Berkshire Hathaway and 3G Capital’s buyout in 2013. While the ketchup-maker’s credit ratings were cut to junk because of the increased leverage, Buffett’s involvement helped the company secure some of the lowest funding costs for a high-yield debt offering ever.
3G has installed a new management team, led by chief executive officer Bernardo Hees, that has focused on cutting costs to boost margins. In the past two years, the company eliminated thousands of jobs, shuttered factories, grounded corporate jets and tried to trim expenses on everything from business trips to copy paper.
Bloomberg News, edited by ESM
