Top dairy co-op grabs record low refinancing rates

Hoard's Dairyman: 

Top dairy co-op grabs record low refinancing rates

Date: 
Fri, 04/05/2013

Dairy Farmers of America will save millions with “once in a lifetime terms.”

by Dennis Halladay, Hoard’s Dairyman Western Editor

As anyone who has recently refinanced a mortgage knows, long-term interest rates are at head-shaking lows.

Just as they’re an opportunity that is too good for many homeowners to pass up, they’re an opportunity that the nation’s biggest dairy cooperative didn’t let get away, either.

At its 14th annual meeting last month in Kansas City, Mo., leaders of Dairy Farmers of America reported that the co-op had refinanced its debt at rates so low they still seemed a little stunned. It’s a move that will save DFA several millions of dollars each year in interest costs.

Co-op president and CEO Rick Smith told the membership that DFA has secured new lines of financing totaling $1.05 billion. Just over half is for terms ranging from 10 to 15 years, at rates ranging from 3.70 to 3.96 percent. He called the refinancing “A once in a lifetime terms opportunity.”

Much of the financing they replace is for shorter terms and at rates of 6.75 percent or more.

Smith said he was shocked when DFA went into the private equity market for unsecured long-term loans. The goal was to obtain $200 million, but lenders offered $650 million – “and this is after we went to great lengths and pain to show them all of our warts,” he explained. DFA ultimately decided to take $350 million.

Those “warts” are the four legal suits brought against DFA’s previous management, which the co-op recently settled by taking a one-time $216 million (after tax) write-off.

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