Tuesday, September 08, 2009

Smithfield Exorbitant Debt Costs

Smithfield Foods (SFD) reported additional losses as they continue to struggle with high input costs such as corn and low protein prices. The most telling part of the press release is when they need to disclose that the renegotiated loans do not have any covenants that can be adversely triggered. Therefore they have breathing room. Look at the price of debt that they took on. 10% for five (5) year notes. That is something like five times treasuries. When you are prepared to pay that much say good bye to decent returns for investors.

Time to consider a new future. Where is the board on this and are they giving direction? Insider trading activity is all sell sell sell!