Interest rate on new HKFoods bond higher than expected

Translation: Original comment published in Finnish on 6/11/2024 at 11:54 am EEST.

With higher-than-expected interest rates, our forecasts will come under some downward pressure and the interest rate level over the whole loan period is likely to be higher than our forecasts.

Refinancing will lead to a distinct rise in interest rates

HKFoods announced on Monday that it had issued notes in the amount of 90 MEUR. The notes carry a floating interest rate based on 3-month Euribor plus a margin of 7.5%. The notes have a term of three years and mature in June 2027.

The issuance of the new bond was expected, as it is part of the refinancing process of the company's previous 90 MEUR bond issue. As we wrote on Monday, our projections included an assumption of around 9% interest rate for the new bond. Taking into account the current 3-month Euribor, the interest rate on the new loan will be around 11.25%. Forecasts for the Euribor rate over the next few years also suggest that the average interest rate over the entire loan period will be higher than expected.

In absolute terms, the interest rate on the new loan is quite high and came in higher than we had forecast. Thus, the high cost of refinancing puts upward pressure on our projections for net financing costs in the coming years. We will update our estimates at the latest with the Q2 results.