CITY OF INDUSTRY, CA – June 29, 2020 – 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.”
About HF Foods Group Inc.
HF Foods Group Inc., headquartered in City of Industry, California, is a leading marketer and distributor of fresh produce, frozen and dry food, and non-food products to primarily Asian/Chinese restaurants and other foodservice customers throughout the Southeast, Pacific and Mountain West regions of the United States. With 14 distribution centers along the U.S. eastern and western seaboards, HF Foods aims to supply the increasing demand for Asian American restaurant cuisine. With an in-house proprietary ordering and inventory control network, more than 10,000 established customers in 21 states, and strong relations with growers and suppliers of food products in the US and China, HF Foods Group is able to offer fresh, high-quality specialty restaurant foods and supplies at economical prices to its large and growing base of customers. For more information, please visit hffoodsgroup.com.
All statements in this news release other than statements of historical facts are forward-looking statements which contain our current expectations about our future results. We have attempted to identify any forward-looking statements by using words such as “anticipates,” “believes,” “could,” “expects,” “intends,” “may,” “should” and other similar expressions. Although we believe that the expectations reflected in all of our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Such statements are not guarantees of future performance or events and are subject to known and unknown risks and uncertainties that could cause the Company’s actual results, events or financial positions to differ materially from those included within or implied by such forward-looking statements. Such factors include, but are not limited to, unfavorable macroeconomic conditions in the United States, competition in the food service distribution industry, particularly the entry of new competitors into the Chinese/Asian restaurant market niche, increases in fuel costs or commodity prices, disruption of relationships with vendors and increases in product prices, U.S. government tariffs on products imported into the United States, particularly from China, changes in consumer eating and dining out habits, disruption of relationships with or loss of customers, our ability to execute our acquisition strategy, availability of financing to execute our acquisition strategy, control of the Company by our Chief Executive Officer and principal stockholder, failure to retain our senior management and other key personnel, our ability to attract, train and retain employees, changes in and enforcement of immigration laws, failure to comply with various federal, state and local rules and regulations regarding food safety, sanitation, transportation, minimum wage, overtime and other health and safety laws, product recalls, voluntary recalls or withdrawals if any of the products we distribute are alleged to have caused illness, been mislabeled, misbranded or adulterated or to otherwise have violated applicable government regulations, failure to protect our intellectual property rights, any cyber security incident, other technology disruption, or delay in implementing our information technology systems, statements of assumption underlying any of the foregoing, and other factors disclosed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Except as required by law, we undertake no obligation to disclose any revision to these forward-looking statements.
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