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Meat processor Tyson Foods Inc. ( TSN - Analyst Report ) 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 - Analyst Report ) and Pilgrim's Pride Corporation ( PPC - Snapshot Report ) . 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).
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