Chiquita Brands Shares Plunge as It Halts Payments on Debt

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Chiquita Brands Shares Plunge as It Halts Payments on Debt

(1/16/01 4:04:43 PM PT)

CINCINNATI -- Shares of Chiquita Brands International Inc. lost half their value after the food producer announced plans to restructure its $862 million in debt, including immediately discontinuing payments on its public debt.

Chiquita said attempts to reduce expenses have been 'masked' by more than six years of continued weakening of European currencies and the 'corrosive' impact of eight years of the trans-Atlantic banana-trade war.

The company, which hired the Blackstone Group as its financial adviser, Tuesday said it will begin discussions with debtholders on the restructuring plan.

'This restructuring initiative is the right next step to ensure the long-term success of our company, said Steven G. Warshaw, Chiquita's president and chief operating officer, in a prepared statement. 'We have already taken aggressive measures to increase productivity and plan to continue with further cost enhancements that will benefit our long-term operating results.'

Chiquita plans to restructure its publicly held senior notes and subordinated debentures. As part of the initiative, the company said it will discontinue all interest and principal payments on its public debt, including $87 million of subordinated debentures due March 28. As a result, the company said all debt may increase.

At 4 p.m. EST on the New York Stock Exchange, shares of Chiquita (CQB) were down $1.44, or 48%, to $1.56.

Chiquita also said it obtained a commitment for an 18-month secured bank credit facility for up to $85 million to replace its expiring bank revolving credit agreement. The new facility will be used to repay $50 million of maturing unit debt, and $35 million will be available for seasonal working capital needs.

Even with the new facility, however, Chiquita said it doesn't expect to be in a position to pay its subordinated debentures when they become due in March, resulting in its decision to restructure all public debt.

Chiquita said the plan -- whether or not administered through a court proceeding -- would hurt shareholders of its common and preferred shares.

If the plan is successful, Chiquita's restructuring would result in converting a significant portion of the company's outstanding $862 million of public debt into common equity.

The company said the intended restructuring won't impact day-to-day operations, nor will it affect any debt of the company's operating units, which will continue to be serviced by cash flow from its Chiquita Fresh and Chiquita Processed Food busineses.

Separately, Great American Financial Resources Inc. and American Financial Group Inc. both said they will write down their investments in Chiquita in the fourth quarter because of the restructuring plan.

Great American, which holds 2.7 million Chiquita common shares, said it plans to write down its investment in Chiquita to market value. As of Sept. 30, the Chiquita investment was carried at $11.5 million.

Great American (GFR) said the write-down won't impact the capital of its insurance units or the units ability to pay dividends.

Meanwhile, American Financial Group (AFG), which holds 24 million Chiquita common shares, said it also will write down its investment in Chiquita to market value. As of Sept. 30, the Chiquita investment was carried at $153 million.

American Financial Group said it doesn't expect the write-down to have a significant impact on its liquidity, nor the liquidity or capital of its insurance units.

-- kevin (ktross@mailcity.com), January 16, 2001


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