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UNFI Seeks $600M Refinance Post Moody's B3 Downgrade

JPMorgan seeks $600 million refinancing for United Natural Foods amid Moody’s downgrade and $2.21 billion debt management.

4/12, 14:48 EDT
Amazon.com, Inc.
Goldman Sachs Group, Inc.
JP Morgan Chase & Co.
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Key Takeaway

  • JPMorgan aims to secure at least $600 million in refinancing for United Natural Foods following a Moody’s downgrade from B2 to B3.
  • The downgrade reflects concerns over financial health, high leverage, and reliance on the Whole Foods contract expiring in 2027.
  • United Natural manages $2.21 billion in debt amidst legal challenges and strategic financing decisions, including a controversial loan from Goldman Sachs.

Refinancing Efforts Underway

JPMorgan Chase & Co is actively engaging with investors to secure refinancing for United Natural Foods Inc. in light of its upcoming debt maturities. The bank aims to arrange financing of at least $600 million to address United Natural’s term loan due in October of the following year. These discussions are in progress, and the specifics of the deal may evolve over time. Both JPMorgan and United Natural have opted not to comment on these ongoing negotiations.

Credit Rating Downgrade

United Natural Foods recently experienced a downgrade in its credit rating by Moody’s Ratings, moving from B2 to B3. This downgrade reflects concerns over the company's financial health, including high financial leverage, very weak interest coverage, and negative free cash flow. Moody’s highlighted the company’s reliance on its distribution contract with Amazon.com-owned Whole Foods Market, which constitutes about 20% of United Natural’s sales, as a significant factor. This contract is set to continue until September 2027.

Debt Structure and Legal Challenges

United Natural Foods is currently managing approximately $2.21 billion in debt, which includes unsecured bonds due in 2028 and a substantial revolving credit facility expiring in 2027. The company's financial landscape has been shaped by various financing decisions over the years, including a notable loan provided by Goldman Sachs Group Inc. in 2018 to facilitate the acquisition of Supervalu. This loan arrangement later became controversial, leading to legal challenges that accused Goldman Sachs of prioritizing fees over the financial stability of United Natural. However, these lawsuits were eventually dismissed. In 2021, a consortium of banks led by Credit Suisse Group AG repriced the loan, adjusting the terms in response to market conditions.

Company Profile

United Natural Foods stands as a key distributor of natural and organic food, along with other grocery products, to retailers and supermarket chains throughout the United States and Canada. The company's role in the supply chain of health-conscious and organic products positions it as a significant player in the grocery and food distribution industry.