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Goldman Sachs, BMO Harris, Guggenheim Provide $245MM Refinance for Landec Corporation

January 05, 2021, 07:08 AM

Landec Corporation, a diversified health and wellness company with two operating businesses, Curation Foods, Inc. and Lifecore Biomedical, Inc., entered into a $245.0 million comprehensive refinancing of its existing credit facilities on December 31, 2020. The new structure includes a five-year $170.0 million uni-tranche term loan agented by Goldman Sachs Specialty Lending Group, L.P. (“Goldman Sachs”) and split equally with Guggenheim Credit Services, LLC (“Guggenheim”) and a $75.0 million asset-based line of credit provided by BMO Harris Bank N.A. (“BMO”), a lender under the Company’s prior credit facilities, which matures in five years subject to a springing maturity date described herein.

The $170.0 million uni-tranche term loan has a five-year term with an interest rate of LIBOR plus 850 basis points. Of the $170.0 million of the total borrowings, $150.0 million of the uni-tranche term loan was funded at closing and the Company has access to an additional $20.0 million in multi-draw delayed draw term loans from the closing date through the second anniversary thereof subject to, among other conditions, certain leverage covenants as defined by the credit agreement. The uni-tranche term loan provides for interest-only payments for the first two years. As a result, the Company expects that its annual interest costs will increase by approximately $6.0 million, but that the reduction in the Company’s annual principal payments of approximately $12.0 million under the new credit facilities compared to the Company’s existing credit facilities will result in an anticipated net cash flows increase of approximately $6.0 million per year for the first two years.

The $75.0 million asset-based line of credit has a five-year term, subject to a springing maturity that is ninety days prior thereto if the uni-tranche term loan remains outstanding at such time, with an initial interest rate of LIBOR plus 225 basis points. Total allowable borrowings under the asset-based line of credit are determined monthly as the lesser of $75.0 million and a borrowing base as calculated under the credit facility, in each case, subject to customary reserves. $36.0 million of the asset-based line of credit was funded at closing.

As a result of refinancing the Company’s existing credit facilities with these new credit facilities, in the third quarter of fiscal 2021, Landec expects to record a $1.2 million charge, primarily as a result of the non-cash write off of unamortized debt issuance costs related to the refinancing under these new credit facilities.

The Company’s financial advisor for the comprehensive refinancing was Armory Securities, LLC.

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