Brampton, Canada-based SunOpta Inc. (STKL) formerly known as Stake Technology Ltd., recently announced that under an amended credit facility, it has secured a two-year, new $135 million loan. The new loan includes a $105 million revolving credit and $30 million non revolving debt.
The company also has an option to raise an additional $30 million under the new credit facility if required. The new loan is held by a syndicate of lenders.
SunOpta, a leading global company focusing on natural, organic and specialty foods and natural health products said that it plans to use the fund to refinance its long-term debt of $33.2 million, in which the company had $30 million outstanding under a non-revolving term debt. Apart from reducing its financial obligation, SunOpta also expects to use the new credit to supports its North American natural and organic food operations.
As of October 2, 2010, long-term debt, excluding current liability, of the company was $17.2 million, down from $34.7 billion as of December 31, 2009. At the end of third quarter 2010, cash and cash equivalents of the company stood at $21.1 million versus $1.8 million at the end of fiscal year 2009.
Apart from paying down the company’s high-cost debt, the increased offering will extend the maturity period of debt. The new credit facility also provides the company with additional financial flexibility and offer future investment opportunities. However, the indebtedness increases SunOpta’s vulnerability and interest risk exposure.
We have a Zacks #3 Rank (short-term Hold recommendation) on SunOpta shares. We reiterate our long-term Neutral rating on the stock.
We have a Zacks #2 Rank (short-term Buy recommendation) on the company’s prime competitors such as Del Monte Food Co. (DLM) and Diamond Foods Inc. (DMND).
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