One of the world's largest bakery companies, Aryzta, has agreed an underwriting deal with five banks, setting the stage for raising €800 million in new capital to strengthen its balance sheet.
Shares in the maker of McDonald's burger buns and Otis Spunkmeyer cookies rose as much as 8% after the company named BofA Merrill Lynch and UBS as lead managers, and Credit Suisse, JP Morgan and HSBC Bank plc as joint global coordinators of its capital raising.
The Swiss-Irish company has warned on its at least three times since 2017 due to rising distribution and labour costs in North America, problems with undocumented workers at a U.S. bakery, high butter prices and weak consumer spending in some European markets, particularly Britain following its vote to leave the European Union.
Facilities Agreement
Aryzta, which said last month it needed a cash infusion following a net loss of more than €1 billion in 2017, also said on Tuesday it had won the consent of a majority of its lenders to amend an existing facilities agreement.
As part of the deal the company's net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) covenant will rise to 5.75 times, from 4.0 times for January 2019 and to 5.25 times for July 2019 from from 3.5 times.
Analyst Andreas von Arx of Baader Helvea said the deal with banks and lenders "shows Aryzta is making progress towards the capital increase" and helped to reduce uncertainty.
"The amended credit conditions should provide the flexibility to execute on the turnaround measures," von Arx wrote in a note to investors.
Even so, he is sticking with his "hold" rating, as Aryzta has failed repeatedly to deliver on priorities of selling assets or stabilizing results. "For the time being there remain too many unknowns to credibly forecast a mid-term valuation," he said.
The shares are down more than 75% this year.
Offload Assets
Chief Executive Officer Kevin Toland, whose company also makes Cuisine de France bread, is still hoping to unload at least €450 million in assets, including its France-based Picard frozen food unit acquired during an ill-fated buying spree.
Aryzta also named new independent board members -- former McDonald's USA president Michael Andres, Green Chile Foods Chairman Gregory Flack and Tim Lodge, a former chief financial officer at agribusiness company COFCO International -- to stand for election at its coming annual general meeting on Nov. 1.
"Each brings significant and diverse industry experience which will be invaluable... as we deliver on what is a multi-year turnaround," Aryzta Chairman Gary McGann said in a statement.
Director Charles Adair plans to retire.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
