Smithfield Foods has moved to reassure investors that it is in compliance with its debt covenants and has adequate liquidity after its shares fell 21% on Friday.
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The shares dropped amid concerns that the growing US financial crisis would affect the company’s access to credit.
Smithfield said it “is on very sound financial footing” and as of 25 September it had over US$500m in liquidity from committed lines of capital.
The company said it is currently in compliance with all covenants and expects to be in compliance for all its major facilities through the fiscal year ending 26 April 2009, with no significant debt payments due until late 2009.
The concerns for the hog and pork producer came the same week Pilgrim’s Pride endured a slump in its shares after it said it would post a “significant” quarterly loss due to high feed costs.
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By GlobalDataSome analysts believe Smithfield shares could be experiencing many of the same issues.
“Smithfield is a very highly leveraged company that is struggling with profitability and perhaps concerns about its liquidity situation and their financial health,” Ann Gilpin, analyst at Morningstar told Reuters.
