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Hostess expects to save $8m interest expense annually after refinancing

Douglas Yu

By Douglas Yu+

22-Nov-2016
Last updated on 23-Nov-2016 at 11:08 GMT2016-11-23T11:08:46Z

Hostess said convenience channels remain profitable for its business.  Photo: Hostess
Hostess said convenience channels remain profitable for its business. Photo: Hostess

Twinkie’s maker Hostess Brands has announced the completion of a debt refinancing, including the terms of its existing first lien term loan and debt.

Hostess’ first lien term loan was dropped from LIBOR plus 3.50% to LIBOR plus 3.00%, “resulting in an interest rate reduction of 50 basis points, while the remaining $83m of the company’s second lien term loan with an interest rate of LIBOR plus 7.50% was refinancing with an incremental $83m first lien term loan at LIBOR plus 3.00%,” according to a statement by the company.

As a result, Hostess said it “expects to realize approximately $8m of interest expense savings annually, or approximately $0.04 of basic earnings per share to common shareholders.”

Commenting on the debt refinancing, president and CEO of Hostess, William Toler, said, “We are very pleased with the refinancing of our debt and the ongoing support from our banking partners and debt holders." 

"These refinancing activities build on the success of our operational initiatives and reflect the strength of our business model and cash flow. We believe our new all first lien capital structure, along with our healthy financial condition, will provide our business with the financial flexibility required to support our continued long term growth.”

Anticipate high single-digit growth

Hostess’ completion of refinancing came one month after the company introduced new products under its various brands, including a peanut butter Ho Hos, and chocolate batter Twinkie, at the NACS Show in Atlanta, Georgia. These will be available in convenient stores across the US in January 2017.

Hostess also entered the frozen food market for the first time with the launch of Deep Fried Twinkie earlier this summer, this site previously reported.

Burke Raine, chief marketing officer, told BakeryandSnacks the company “has reclaimed its old spot” as the leader of sweet baked goods in the convenience channel, according to the latest IRI data, and anticipates a high single-digit growth rate next year.

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