Universal Corporation (UVV), the leading global leaf tobacco supplier, has been working diligently to maintain a strong balance sheet. Over the last two fiscal years, Universal has reduced long-term debt by more than $50 million and paid more than $60 million in annual dividend payments to common and preferred shareholders.
Last week, Universal Corp. completed its new bank credit facility agreement, which consolidates and extends maturities of its short-term revolving credit and long-term borrowing facilities, as disclosed in the company’s filing with the Securities and Exchange Commission on Dec 31, 2014.
The new agreement includes a $430 million 5-year revolving credit facility, a $150 million 5-year term loan, and a $220 million 7-year term loan. Borrowings under the agreement bear interest at variable rates based on LIBOR plus a margin of 1.50% to 1.75%.
The term loans, which were fully funded at closing, require no amortization and are pre-payable without penalty prior to maturity. The new revolving credit facility contains terms and conditions that are substantially similar to the company's previous revolving credit facility and include a feature allowing for additional borrowings of up to $100 million under certain conditions.
J.P. Morgan Securities LLC, a unit of JPMorgan Chase & Co. (JPM); SunTrust Robinson Humphrey, Inc., an arm of SunTrust Banks, Inc. (STI) and AgFirst Farm Credit Bank were the advisors on the transaction.
Universal believes this new facility will boost the company’s balance sheet and will deliver well-priced financial resources for the next 5 to 7 years.
The company had recently repaid its $100 million 6.25% medium-term public notes, which matured on Dec1, 2014, through a combination of cash on hand and borrowings under the previous revolving credit facility.
Besides, the board of Universal Corp. approved a quarterly dividend hike of 1.9% last November, thereby maintaining the trend of rewarding its shareholders consistently. The new dividend of 52 cents is up from the previous quarterly dividend of 51 cents per share and represents the forty-fourth consecutive year of dividend growth. The dividend will be paid on Feb 9, 2014 to shareholders of record as of Jan 12.
Regular dividend payments thus reflect the company’s confidence in its fundamentals. This also shows that the company is keen on strengthening its balance sheet and offering flexibility of resources.
Reynolds American, Inc. (RAI) is a better ranked company in the tobacco sector with a Zacks Rank #2 (Buy).
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