FAGE Int’l offers to isolate Greek units in bid to woo investors

FAGE International SA is seeking to persuade bond investors to fund its US expansion by offering to isolate its units in Greece, buffering the rest of the yogurt maker from declining revenue there.

FAGE, which traces its roots to a small dairy shop in Athens, proposed changes to its bond indentures on Monday that would limit inter-company transactions with its Greek units and “exclude such subsidiaries from certain covenants and events of default,” according to an e-mailed statement.

The company also plans to sell an additional $250 million of its 9.875 percent bonds due in 2020 to refinance shorter-term notes and increase production at its Johnstown, New York, plant.

The firm, which moved its parent company to Luxembourg in October, is looking to bolster its claim to the more than $6 billion US yogurt market that’s withstood advances by Kraft Foods Inc and General Mills Inc.

While the proposed amendments won’t affect the company’s credit quality, it may make the new debt more attractive to investors by reducing concern that a slowdown in Greece would sap earnings from elsewhere, according to Standard & Poor’s.

“It’s to secure the deal, to make it more attractive to investors,” Florence Devevey, an S&P credit analyst in Madrid, said in a telephone interview.

“It’s more to reassure the market that if there were an issue in Greece, then that wouldn’t lead to a default in the notes.”

FAGE is working to shield bondholders from the sustained economic crisis in Greece that’s hurt consumer demand and hindered its ability to collect payments from retailers.


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