ahold cancels rescue bank facility to cut costs
UPDATE 3-Ahold cancels rescue bank facility to cut costs February 4, 2005 4:02am ET (Reuters)
(Adds share and analyst reaction, Schuitema comment)
By Marcel Michelson
AMSTERDAM, Feb 4 (Reuters) - Dutch retailer Ahold will cancel a three-year bank credit facility it obtained in December 2003 to shore up its finances after an accounting scandal, the company said on Friday.
"With the high cash balances resulting from the success of its asset divestment program, Ahold's liquidity position is strong and the company is able to reduce financing cost by terminating the facility," Ahold said.
The bank facility was for 300 million euros ($390 million) and $1.45 billion. The company said it was in talks with financial institutions to establish a new credit facility later this year on more favourable terms.
SNS analyst Ton van Ooijen said the news was positive. Ahold shares were up 0.77 percent at 6.56 euros in early trading, taking their gain so far this year to more than 14 percent.
"With a cash position like Ahold's, they don't really need this credit facility but it costs them money so it makes sense to end this," said a trader at a Dutch brokerage.
Ahold has underperformed the DJ Stoxx European retail index by 48 percent in the past two years but outperformed the sector by 7.5 percent in the past three months.
The world's fourth-largest food retailer and food services group will deposit cash with a bank to back as much as $700 million worth of letters of credit issued under the facility.
"We are ahead of schedule in executing our divestment program and are nearing completion of this process. We feel we are now well positioned to move into a new financing phase on better terms," said Chief Financial Officer Hannu Ryopponen.
But there was also less good news as the chief executive of Schuitema in which Ahold has a 73 percent stake, told the Finacieele Dagblad newspaper he did not want closer cooperation with Ahold's flagship Albert Heijn shops.
Ahold Chief Executive Anders Moberg wanted closer cooperation to cut costs but Schuitema boss Jan Brouwer said Albert Heijn was the biggest rival of his C1000 stores.
The December 2003 credit facility followed a March 2003 emergency bank pact and a 2.9-billion rights issue.
The facility carried strict rules for operating earnings to net debt and interest expense ratios and was secured with shares in U.S. units Giant and Stop & Shop.
Ahold is on track to complete a 2.5-billion-euro divestment programme ahead of schedule after selling two store chains in the United States and receiving strong interest in assets remaining on the block.
Ahold, which will publish 2004 results on March 29, had net debt of 7.5 billion euros in the third quarter. It is rated BB by Standard & Poor's and Fitch and Ba2 by Moody's and aims to regain investment grade this year.
Ahold ranks fourth in size behind Wal-Mart of the United States, Carrefour of France and Germany's Metro . (Additional reporting by Theo Kolker)
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