Banks said to lend China's Shuanghui $7 billion for Smithfield deal

Fri May 31, 2013 7:26am EDT
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By Stephen Aldred and Kane Wu

HONG KONG (Reuters) - Bank of China and Morgan Stanley have combined to provide $7 billion of loans to finance Shuanghui International's record deal to buy U.S. pork producer Smithfield Foods SFD.N, people familiar with the matter said on Friday.

The total value of the Chinese company's record agreement was $7.1 billion, including net debt, according to the deal's announcement on Wednesday. But the two companies did not offer details on how Shuanghui financed the deal.

According to the people familiar with the matter, Bank of China has provided up to $4 billion in financing to Shuanghui, in a five-year term loan, and will syndicate the facility.

Morgan Stanley is adding $3 billion in a term loan as well, they said, and will also sell down the amount.

The $7 billion of financing will go to the $4.9 billion in cash that Shuanghui agreed to pay Smithfield, with rest going to refinancing Smithfield's debt.

Smithfield has $3.45 billion in gross debt outstanding, which includes corporate and high yield debt, Thomson Reuters data show. The company has around $1 billion in cash and short term investments, the data show.

Morgan Stanley and Bank of China declined to comment on the loan deals. Morgan Stanley also advised Shuanghui on its bid.

The deal will face scrutiny by the Committee on Foreign Investment in the United States (CFIUS), a government panel that assesses national security risks. At least one member of Congress said the deal raised alarms about food safety.   Continued...

Meat products of Shuanghui (Shineway) Group are seen on display on a shelf at a supermarket in Wuhan, Hubei province May 31, 2013. REUTERS/Stringer