Chiquita Announces Financial Restructuring Initiative
Company also obtains commitment for 18-month bank credit facility
CINCINNATI, Jan. 16 /PRNewswire/ -- Chiquita Brands International Inc.
(NYSE: CQB) today announced an initiative designed to resolve its upcoming
debt maturities and improve its financial liquidity. The Company intends to
regain its financial health by restructuring its highly leveraged balance
sheet. In addition, the Company will continue to pursue cost-reduction
measures similar to those that have significantly strengthened its operations
in recent years.
The Company said that it proposes to restructure the publicly held debt of
Chiquita Brands International, Inc., which is a parent holding company without
business operations of its own. The Company emphasized that this intended
financial restructuring will not impact day-to-day operations with regard to
its employees, customers, suppliers, distributors and general business. The
restructuring would also not affect any debt of the Company's operating
subsidiaries, which will continue to be serviced by cash flow from the
Chiquita Fresh and Chiquita Processed Food businesses.
The Company has retained The Blackstone Group as its financial advisor and
will begin discussions with holders of the parent company's publicly held
senior notes and subordinated debentures concerning a balance sheet
restructuring that is in the best interests of the Company and its
stakeholders. If successful, the restructuring would result in the conversion
of a significant portion of Chiquita's outstanding $862 million of public debt
into common equity. As part of this initiative, the Company is discontinuing
as of today all interest and principal payments on its public debt, including
$87 million of subordinated debentures due on March 28, 2001. As a result,
all of such debt may become subject to acceleration. In addition, such a
restructure, whether or not administered through a court proceeding, would
adversely affect the holders of Chiquita's common and preferred stock.
Chiquita also announced that it has 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 subsidiary debt, and $35 million will be available for
seasonal working capital needs. Completion of the new facility, which is
subject to certain conditions, is expected by early February. Even with this
new facility, however, Chiquita does not expect to be in a position to repay
the parent company's subordinated debentures when they become due in March,
and has concluded that it is now therefore appropriate to enter into
discussions with holders of all of its public debt regarding a restructure.
Steven G. Warshaw, President and Chief Operating Officer of Chiquita,
said, "This restructuring initiative is the right next step to ensure the
long-term success of our Company. 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. Our operations are sound
and we have maintained the vitality and market leadership of the Chiquita
brand while dramatically improving our operating strengths and underlying cost
structure.
"However, these accomplishments have been masked by over six years of
continued weakening of European currencies and the corrosive impact of eight
years of an illegal European Union banana import regime that today still
remains unreformed. Indeed, if not for the increased weakening of the euro
since its inception in January 1999, we would have already demonstrated
substantial improvements in Chiquita's operating performance and cash flow,
even despite poor market conditions experienced by all banana industry
participants.
"Instead, the Company finds itself in a position where the increasingly
severe tightening over the past several months of the bank credit and other
capital markets previously accessed by Chiquita has made them unavailable to
refinance the parent company's near term maturities. Under these
circumstances, we believe that the restructuring initiative announced today is
in the Company's best interests."
Warshaw continued, "It is disheartening after years of suffering from the
European Union's illegal banana import regime that Chiquita's stockholders
will endure further hardship. However, at this point we are obliged to pursue
a restructuring that will provide a level of debt that our operations can
reasonably be expected to support, and enhance the future prospects for
Chiquita's profitable growth."
Warshaw concluded, "Chiquita's cash flow and financial resources, which
have been bolstered by the new credit facility announced today, will be more
than ample to meet day-to-day obligations of the business. For our employees,
customers, suppliers and operating partners around the world, this means
business as usual today, with the prospect of an even stronger Chiquita
tomorrow."
Chiquita is a leading international marketer, producer and distributor of
quality fresh fruits and vegetables and processed foods.
This press release contains certain statements that are "forward-looking
statements" within the meaning of the Private Securities Litigation Act of
1995. These statements are subject to a number of assumptions, risks and
uncertainties, including product pricing, costs to purchase or grow (and
availability of) fresh produce and other raw materials, currency exchange rate
fluctuations, natural disasters and unusual weather conditions, operating
efficiencies, labor relations, ability to reach agreement with holders of
Chiquita's parent company debt regarding a restructuring, ability to obtain
and complete bank and other financings when and as needed, actions of
governmental bodies, and other market and competitive conditions, many of
which are beyond the control of Chiquita. Actual results or developments may
differ materially from the expectations expressed or implied in the forward-
looking statements.
Chiquita Brands' financial challenges began with the announcement of an
illegal European Union banana import regime in 1992. Prior to this regime,
Chiquita had the largest share of the European market, with Europe accounting
for nearly half of Chiquita's sales and the largest part of its profits. The
EU's illegal quota and licensing regime has therefore severely impacted
Chiquita's European market share, profits and stock price. For every year
that the illegal EU policies have been in effect, the World Trade Organization
has calculated that Chiquita has sustained annual damages of almost $200
million, resulting in total damages since 1993 of over $1.5 billion.
The United States and Latin America producing nations have won successive
international trade cases against illegal EU banana import policies. The EU
Commission has used legal delays and maneuvers to frustrate its opponents,
while at the same time waging a public relations campaign designed to shift
blame to the United States. Virtually all of the Western Hemisphere,
including the Caribbean, as well as the African nations and many EU member
states consider the EU Commission's latest scheme known as "first-come-first-
served" to be explicitly WTO-illegal.
Chiquita has suffered the most damage under Europe's illegal banana
policies and will continue to suffer harm if yet another illegal regime is
allowed to go into effect. Chiquita will continue its vigorous efforts to
resolve this trade dispute legally, fairly and in a way that restores
Chiquita's market access in conformity with international trade law.
SOURCE Chiquita Brands International, Inc.
-0- 01/16/2001
/CONTACT: Media, Steven G. Warshaw, President and Chief Operating
Officer, or, William T. Sandstrom, Director of Investor Relations, both of
Chiquita Brands International, Inc., 513-784-8517, or other calls, 513-784-
8100/
/Web site: chiquita.com
(CQB)
CO: Chiquita Brands International, Inc. |
