Chiquita Brands International is asking lenders for a temporary debt covenant waiver on certain senior credit facilities for the period ending September 30.
While the company’s fiscal third quarter has not yet been reported, the company is seeking the “additional flexibility” from lenders to help weather quarterly sales shortfalls attributed to the recent e. coli outbreak in the United States related to fresh spinach, as well as lower banana prices blamed on changes to import rules in European Union. If the temporary waiver is approved by creditors, Chiquita plans to use the time to seek a more permanent waiver or amendment to its debt covenants.
Last week, Chiquita officials suspended the company’s quarterly dividend of $0.10 per share, and said that they would redirect the funds, which total about $17 million, to reduce debt and “enhance financial flexibility.” In addition, Chiquita Chairman and CEO Fernando Aguirre announced that the company may sell its shipping and logistics operations, Great White Fleet. Asset sale proceeds would be “used primarily to reduce debt, as well as to invest in new growth opportunities,” noted Aguirre, in a press statement.
In June of 2005, Chiquita bought salad and spinach packager Fresh Express for $855 million. The acquisition added about $1 billion to Chiquita’s consolidated annual revenues, according to regulatory filings, but since the e. coli outbreak, has exposed the company to new financial risks.