Shares of consumer packaged goods company B&G Foods (NYSE: BGS) dropped on Wednesday after the company announced details regarding its planned debt offering Tuesday night. As of 12:15 p.m. ET, B&G Foods stock was down about 5%, which is a big move for this ordinarily sleepy stock.
As of the second quarter of 2023, B&G Foods had a substantial debt load of over $2.2 billion. Of this, $875.6 million is due in 2025. But management is already planning ahead. In today’s press release, the company said that it’s planning to raise $550 million (almost $539 million net of expenses) via senior secured notes. The proceeds will go to paying down the debt due in 2025.
B&G Foods’ new notes are due in 2028. However, the market likely isn’t thrilled with the details. The 2025 notes had a 5.25% interest rate. The new notes have an 8% interest rate. In short, servicing the debt is getting more expensive.
In addition to the aforementioned debt, B&G Foods has a $550.6 million term loan due in 2026 and $550 million in senior notes due in 2027.
With low revenue growth and a heavy debt load, it’s not surprising that Wall Street isn’t very upbeat about B&G Foods stock. After the company proposed its new notes for 2028 yesterday, TD Cowen analyst Robert Moskow said that he expects the stock to underperform the market average, according to StreetInsider.
Moskow’s assessment sounds about right to me. B&G Foods stock has been declining over the last decade. And while the restructuring of its debt provides flexibility, I don’t think it materially improves the investment thesis.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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