Aramark Completes Debt Repricing

Rhea-AI Summary

Aramark (NYSE: ARMK) successfully repriced its 2028 and 2030 Term Loans, reducing pricing by 50 basis points. The new rate is SOFR plus 200 basis points, saving $10 million annually in interest expenses. The company aims to achieve a leverage ratio of approximately 3.5x by the end of the fiscal year.

Financial Analyst

The repricing of Aramark's Term Loans can be seen as a strategic financial management move. By reducing the interest rates on their 2028 and 2030 Term Loans by 50 basis points, the company is capitalizing on favorable market conditions to lower its cost of debt. This decision is likely to be well-received by investors, as it directly contributes to the reduction of annual interest expenses by an estimated $10 million. It's a smart play that enhances cash flow, which could be used for reinvestment, debt reduction, or shareholder returns.

It is also noteworthy that the company is targeting a leverage ratio of approximately 3.5x by the end of the fiscal year, which would be its lowest since 2017. A lower leverage ratio generally indicates a company is using less debt to finance its operations, which can reduce financial risk and potentially lead to a more favorable credit rating. This could further decrease borrowing costs in the future and is indicative of a solid financial strategy aimed at sustainable growth.

Debt Market Analyst

From a debt market perspective, the reduction in the pricing of Aramark's Term Loans suggests that there is strong demand for the company's debt. This is a positive signal for the company's creditworthiness. The new applicable rate of SOFR plus 200 basis points, following a 50 basis point reduction, indicates that Aramark has been able to negotiate better terms amidst a potentially volatile interest rate environment.

Understanding SOFR, which stands for Secured Overnight Financing Rate, is key here. It's a benchmark interest rate for dollar-denominated derivatives and loans that is increasingly used in the financial sector. SOFR is based on transactions in the Treasury repurchase market, where investors offer banks overnight loans backed by their Treasury securities. The shift from the previously used LIBOR to SOFR is part of a broader global transition towards more reliable benchmark rates.

Investor Relations Specialist

The communication of this financial maneuver by Aramark's CFO underscores their commitment to transparency and confidence in the company's financial health. The emphasis on achieving a lower leverage ratio aligns with a narrative that should resonate positively with shareholders and potential investors. It paints a picture of a company that is not only improving its capital structure but also is in control of its financial trajectory.

For stakeholders, the projected interest expense savings and improved leverage ratio are indicative of a management team that is actively seeking to optimize the company's financial standing. This proactive approach to debt management could be a signal for investors that Aramark is positioning itself for long-term stability and growth, which may be reflected in the company's stock performance over time.

Proactively reduced pricing on Term Loans due 2028 and 2030 by 50 basis points

PHILADELPHIA--(BUSINESS WIRE)-- Aramark (NYSE: ARMK), a global leader in food and facilities management, announced today the successful completion of a favorable repricing of the Company’s 2028 Term Loan B of $730 million and 2030 Term Loan B of $1.1 billion. The new applicable rate for both Term Loans will be Secured Overnight Financing Rate (“SOFR”) plus 200 basis points, which reduces pricing by 50 basis points. Aramark’s proactive action is expected to result in an interest expense savings of approximately $10 million annually. There is no change to the Company’s outstanding debt, maturities, or covenants from the repricing.

“We are very pleased with the strong market demand for our debt, which provided an opportunity to further enhance our capital structure,” said Jim Tarangelo, Aramark’s Chief Financial Officer. “This transaction reflects the continued positive momentum in the business, and we remain focused on achieving our leverage ratio¹ target of approximately 3.5x by the end of this fiscal year. This would represent Aramark’s lowest leverage ratio since 2017."

¹Leverage ratio is defined as Net Debt to Covenant Adjusted EBITDA

About Aramark
Aramark (NYSE: ARMK) proudly serves the world’s leading educational institutions, Fortune 500 companies, world champion sports teams, prominent healthcare providers, iconic destinations and cultural attractions, and numerous municipalities in 15 countries around the world with food and facilities management. Because of our hospitality culture, our employees strive to do great things for each other, our partners, our communities, and the planet. Aramark has been recognized on FORTUNE’s list of “World’s Most Admired Companies,” Fair360’s “Top 50 Companies for Diversity” and “Top Companies for Supplier Diversity,” Newsweek’s list of “America’s Most Responsible Companies 2024,” the HRC’s “Best Places to Work for LGBTQ Equality,” and earned a score of 100 on the Disability Equality Index. Learn more at www.aramark.com and connect with us on LinkedIn, Facebook, X, and Instagram.

Forward-Looking Statements
Certain statements made in this press release may constitute “forward-looking statements” within the meaning of the federal securities laws. Forward looking statements are based on management’s expectations, estimates, projections, and assumptions. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors. Additional information regarding these factors is contained in the “Risk Factors,” “Legal Proceedings” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and other sections of Aramark’s Annual Report on Form 10-K, filed with the SEC on November 21, 2023, as such factors may be updated from time to time in its other periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov and which may be obtained by contacting Aramark’s investor relations department via its website at www.aramark.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240327922551/en/

Inquiries

Felise Glantz Kissell (215) 409-7287

Kissell-Felise@aramark.com

Gene Cleary (215) 409-7945

Cleary-Gene@aramark.com

Source: Aramark

What did Aramark announce regarding its Term Loans?

Aramark successfully repriced its 2028 and 2030 Term Loans, reducing pricing by 50 basis points.

What is the new applicable rate for Aramark's Term Loans?

The new rate for both Term Loans will be SOFR plus 200 basis points.

How much is Aramark expected to save annually in interest expenses?

Aramark is expected to save approximately $10 million annually in interest expenses.

What leverage ratio target is Aramark aiming to achieve by the end of the fiscal year?

Aramark aims to achieve a leverage ratio of approximately 3.5x by the end of the fiscal year.