Thai Union has received an A+ financial rating despite the impact of its decision to sell Red Lobster at a significant loss.
The rating, released 25 January, was issued by Tris Rating Co. – a credit rating agency minority owned by Standard & Poor's.
Thai Union’s announcement it will exit Red Lobster and take a THB 18.5 billion (USD 530 million, 481 million) impairment charge in Q4 2023 was made on 16 January 2024.
“Tris Rating views that the company’s bottom line will improve from 2024 onward as the company no longer incurs losses from Red Lobster’s operation,” the company said in a press release. “Therefore, Tris Rating anticipates no immediate impact on the ratings and outlook of the company, which [is] currently assigned as “A+”.
Thai Union plans to release its Q4 2023 and FY 2023 results in February 2024. In advance of that release, the Samut Sakhon, Thailand-based seafood company said it was planning a bondholders meeting “in order to seek covenant waivers before the release of 2023 financial results.”
“The meeting will be arranged for five tranches of debentures with separate quorums and vote counts for each tranche,” it said. “In this regard, the registration book for debentures transfer will be closed on 1 February 2024, and the bondholder meeting will be arranged on 15 February 2024.
At the meeting, Thai Union will advance proposals to consider and approve a relaxation of the criteria for interest coverage ratio calculations and a relaxation of the criteria for calculating dividend cap restrictions.
“In this regard, the company will seek a one-time covenant waiver from bondholders to exclude the loss on impairment from the calculation of interest coverage ratio and the calculation of dividend cap restriction from the 2023 reported consolidated net income,” it said. “After excluding the loss on impairment, which has no cash impact nor impact to the company’s ability to repay debt, the financial performance of the company remains strong.”
Thai Union said even if it doesn’t get approval to waive its covenants, it still has “financial flexibility and sufficient credit lines available to repay any or all of the relevant debentures.”
Technomic Industry Research and Insights Director Kevin Schimpf told SeafoodSource Red Lobster will likely attract a healthy suite of buyers.
"It’s difficult to speculate exactly what comes next for the brand, but I’m sure there will be plenty of interested buyers given that Red Lobster is still the largest seafood restaurant chain in the U.S. by a significant margin, even despite its recent struggles," he said.
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