Meat processor Tyson Foods Inc. (TSN) recently commenced a public offering of senior notes worth $1.0 billion. These notes will mature in 2022 and carry an interest rate of 4.5%. The offer will cease on June 13, 2012.
The raised amount will enable Tyson to pay off its $810 million of 10.5% senior unsecured notes due in 2014.
While this increases Tyson’s financial flexibility, its debt burden increases. At the time of announcing second-quarter fiscal 2012 results, Tyson reported long-term debt of $2.14 billion, up from $2.11 billion in the first quarter of fiscal 2012. The company exited the quarter with cash and cash equivalents of $857 million.
Long-term debt included $458.0 million of 3.25% convertible senior unsecured notes issued in September 2008, payable on October 15, 2013,$638.0 million of 6.85% senior notes, payable on April, 2016, $120 million due on May 2018 (7.0% interest rate) and $18 million due on January 2028 (7.0% interest rate), apart from $810 million worth senior notes payable in March 2014. It also includes GO Zone tax-exempt bonds of $100.0 million due on October 2033 (0.2% interest rate). The other portion of the debt is $136.0 million.
Moreover, Tyson faces stiff competition from both national and regional players like Smithfield Foods Inc. (SFD) and Pilgrim's Pride Corporation (PPC). The company’s products primarily compete on the basis of price, product safety and quality, brand identification and availability.
Currently, we have a long-term Neutral recommendation on Tyson, which carries a Zacks #3 Rank (short term Hold rating).
PILGRIMS PRIDE (PPC): Free Stock Analysis Report
SMITHFIELD FOOD (SFD): Free Stock Analysis Report
TYSON FOODS A (TSN): Free Stock Analysis Report
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