v3.25.2
DEBT
 6 Months Ended
Jun. 29, 2025
Debt Disclosure [Abstract]  
DEBT DEBT
Senior Unsecured Revolving Credit Facility
In February 2025, we refinanced our $2,100 million senior unsecured revolving credit facility (“Senior Revolving Credit Facility”) extending the maturity date from May 21, 2027 to February 12, 2030, with the option to extend the maturity date for up to two one-year periods, subject to obtaining the lenders’ consent and satisfaction of certain other conditions. The Senior Revolving Credit Facility capacity remains at $2,100 million. As part of the new agreement, there are no longer any subsidiary guarantors under the Senior Revolving Credit Facility which also released the subsidiary guarantors from our Senior Unsecured Notes. The Senior Revolving Credit Facility bears interest at the Secured Overnight Financing Rate plus a margin ranging from 0.875% to 1.50% per annum, or, at our election, at a base rate plus a margin ranging from 0.00% to 0.50% per annum, in each case depending on our senior unsecured debt ratings. The Senior Revolving Credit Facility also contains financial maintenance covenants requiring us to maintain a maximum total consolidated leverage ratio (ratio of consolidated funded debt to consolidated capitalization, each as defined in the Senior Revolving Credit Facility) of 0.50 to 1.00 (which we may elect to increase to 0.55 to 1.00 with respect to any fiscal quarter in which a material acquisition is consummated and the immediately following three consecutive fiscal quarters, subject to certain restrictions) and a minimum interest coverage ratio (“ratio of earnings before interest, taxes, depreciation and amortization (“EBITDA”) to consolidated interest expense, each as defined in the Senior Revolving Credit Facility”) of 3.50 to 1.00.
Our Senior Revolving Credit Facility contains customary covenants, including, but not limited to, restrictions on our ability and that of our subsidiaries to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets subject to their security interest, or enter into transactions with affiliates, each subject to certain exceptions as set forth therein. We are currently in compliance with the covenants under our Senior Revolving Credit Facility.
Accounts Receivable Securitization Facility
We maintain a $225 million accounts receivable securitization facility (“Securitization Facility”), which matures in November 2027. As part of the Securitization Facility, certain accounts receivable of our major domestic meat processing subsidiaries are sold to a wholly-owned “bankruptcy remote” special purpose vehicle (“SPV”). The SPV pledges all such accounts receivable not otherwise sold pursuant to the Monetization Facility (as defined below) as security for loans made, and letters of credit issued, by participating lenders under the Securitization Facility. The SPV is included in our condensed consolidated financial statements and therefore the accounts receivable owned by it are included in our condensed consolidated balance sheets. However, the accounts receivable owned by the SPV are separate and distinct from our other assets and are not available to our other creditors should we become insolvent. As of June 29, 2025, the SPV held $410 million of accounts receivable. We must maintain certain ratios related to the collection of our receivables as a condition of the Securitization Facility agreement. As of June 29, 2025, we had $28 million in letters of credit issued under the Securitization Facility. None of the letters of credit were drawn upon.
Monetization Facility
In addition to the Securitization Facility, until July 22, 2025, we maintained an uncommitted $250 million accounts receivable monetization facility (“Monetization Facility”). At Smithfield’s election and subject to the purchasing banks’ approval, certain accounts receivable were sold by the SPV to purchasing banks, so long as the uncollected outstanding amount of accounts receivable sold pursuant to the Monetization Facility did not exceed $250 million in the aggregate at any time, among other limitations. In the event of a sale, the purchasing banks assumed all credit risk related to the receivables while we maintained risk associated with customer disputes. We accounted for the sale
of receivables to a purchasing bank by derecognizing the receivables from our condensed consolidated balance sheet upon transfer of control to the purchasing bank, and recognized a discount on the sale in SG&A in the condensed consolidated statement of income. The proceeds from the sale of receivables are included in net cash flows from operating activities in the condensed consolidated statement of cash flows. On behalf of the purchasing banks, we serviced all receivables sold under the Monetization Facility. As of June 29, 2025, the uncollected balance of receivables that had been sold to purchasing banks was $232 million. We had no servicing asset or liability outstanding as of June 29, 2025.
In the first quarter of 2023, we sold $227 million of accounts receivable at a discount and received proceeds totaling $225 million. We reinvested $803 million and $774 million of cash collections from customers in the revolving sale of accounts receivable to purchasing banks in the three months ended June 29, 2025 and June 30, 2024, respectively and $1,829 million and $1,814 million in the six months ended June 29, 2025 and June 30, 2024, respectively. We recognized charges totaling $3 million and $4 million in the second quarters of 2025 and 2024, respectively, and $6 million and $7 million in the first six months of 2025 and 2024, respectively, attributable to the discount on the sale of accounts receivable in SG&A in the condensed consolidated statement of income.
On July 22, 2025, we terminated the Monetization Facility. The Monetization Facility originally was established to provide us with additional liquidity and working capital flexibility. In light of our liquidity position and internal capital resources as of July 22, 2025, we determined that the Monetization Facility was no longer cost-effective or necessary. There were no early termination penalties or other material exit costs incurred in connection with the termination of the Monetization Facility.