HF Foods Secures Lower Fixed Interest Rate on $80 Million of Floating Rate Debt

CITY OF INDUSTRY, Calif., June 29, 2020 (GLOBE NEWSWIRE) -- HF Foods Group Inc. (NASDAQ: HFFG), a leading food distributor to Asian restaurants across the Southeast, Pacific and Mountain West regions of the United States, has secured a lower fixed interest rate on $80 million of its floating rate debt with J.P. Morgan Chase, potentially reducing the Company’s anticipated interest expense in the coming years.

On June 24, 2020, HF Foods Group entered into an interest rate swap (“IRS”) contract for the notional amount of $80 million with its current lender, J.P. Morgan Chase. Under the terms of the agreement, $80 million of the Company’s floating rate loan portfolio will now be fixed at an interest rate of 0.413% plus the agreed spread from June 30, 2021 to June 30, 2025. The Company’s existing term loan of approximately $74.3 million was pegged to a floating rate of 1-month LIBOR (London Interbank Offering Rate) + 1.875% per annum, whereas the revolving line of credit was pegged to 1-month LIBOR + 1.375% per annum.   

The IRS contract effectively locks in the Company’s future interest expense at 2.288% per annum for the Company’s outstanding term loan and 1.788% per annum for a portion of the revolving line of credit up to an aggregate amount of $80 million during the contract period, mitigating the potential risk of rising interest rates from June 30, 2021 to June 30, 2025.

“With interest rates across the globe at unprecedentedly low levels, we saw a unique opportunity to restructure our loan portfolio on terms that may be more advantageous for the Company,” said Victor Lee, CFO of HF Foods. “By securing a lower, fixed rate for a portion of our loan portfolio, we’ve not only hedged approximately 70% of our total floating rate loan, pegged to 1-month LIBOR, which was as high as 2.5% in January 2019, but we believe that our interest payments will be significantly reduced compared to pre COVID-19 levels in first quarter 2020 and will be more predictable. We believe these new terms will benefit the business as a more stable rate should allow us to more accurately forecast our financial expenditures and may reduce our interest expense should LIBOR return to more normalized levels in the near future.”