Universal Corp. Borrowing $100 Million

Source from:  Richmond Times-Dispatch 11/19/2009

Universal Corp., the giant tobacco dealer, is borrowing nearly $100 million to refinance lower-interest rate, short-term IOUs and overdrafts it used to buy leaf this season. The Richmond-based company will pay 6.25 percent on a new issue of five-year bonds, it disclosed in filings with the U.S. Securities and Exchange Commission. Universal will use the bulk of the money to repay $70 million it borrowed under a credit line bearing interest of 1 percent to 3.25 percent, it reported in one filing. The company typically sees short-term borrowing jump during the spring and summer, to pay for the tobacco it purchases from growers. Over the past two years, those seasonal increases have been larger than usual -- 79 percent this year and 106 percent the year before, a review of its recent filings showed. The company, meanwhile, has seen its stockpiles of leaf steadily rise. As of Sept. 30, it had nearly $920 million of tobacco leaf in inventory, about 20 percent more than the average of the previous five years, though sales have declined over that period, the review found. On the other hand, the company expects the next crop of flue-cured tobacco in Brazil, one of the world's major producers, will be down because of heavy rains there. In the U.S. and Canada, the volume of flue-cured tobacco from this year's harvest was actually down, but a better mix of leaf offset the dollar impact of that. Universal Vice President and Treasurer Karen M.L. Whelan did not return calls yesterday. Enditem