Berry Global Group's (BERY) Unit To Issue Senior Secured Notes
Zacks Investment Research | Dec 09, 2019 08:33PM ET
Berry Global Group, Inc. (NYSE:BERY) yesterday announced an offering of €725 million worth of first-priority senior secured notes. Notably, these offerings will be carried out by Berry Global, Inc. — a wholly-owned subsidiary of Berry Global Group.
Per the company, the first-priority senior secured notes will be issued in two parts — including notes due to mature in 2025 and the other set to expire in 2027. The proceeds from the notes offering will likely be used by the company to repay Berry Global’s existing term loans and some related expenses.
Notably, Berry Global Escrow Corporation — an indirect, wholly-owned subsidiary of Berry Global Group — issued $1,250 million worth of first-priority senior secured notes and $500 million worth of second-priority senior secured notes in May 2019. Notably, the first-priority senior secured notes are due to mature in 2026, while the second-priority notes will mature in 2027.
Berry Global Group’s High Debt Profile
The company has a highly leveraged balance sheet. At the end of fourth-quarter fiscal 2019 (ended Sep 28, 2019), its current and long-term debts were at $11,365 million, reflecting a 94.5% increase from the previous year. Net interest expenses were $329 million in fiscal 2019, up 27% year over year.
Although the current notes offering will help in repaying existing term loans, we believe that it will also add to the company’s existing debt balance. Unwarranted rise in debt levels, in turn, can inflate its financial obligations and hurt profitability. Notably, the company continues to predict interest expenses of $500 million for fiscal 2020 (ending September 2020).
Zacks Rank & Stocks to Consider
With a market capitalization of $6.3 billion, Berry Global Group presently carries a Zacks Rank #3 (Hold). The company benefits from acquired assets, robust capital-allocation policies and restructuring initiatives. However, high debts, forex woes and inflating costs remain concerning.
Over the past three months, Berry Global Group’s shares have gained 19.9% compared with 4.8% growth recorded by the Zacks Investment Research
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