Westrock Coffee Receives $75M Equity Investment; Product Launch & Equipment Delays Hurt Near-Term Guidance

Westrock Coffee Company WEST has entered into definitive agreements with affiliates of HF Capital LLC and the Herbert Hunt family to make aggregate equity investments of $75.0 million in the company.

The investment will happen through the purchase of 7.5 million shares of Westrock at $10 per share.

The offer price represents a 10.3% discount to the company's closing price on June 29. The transactions are expected to close in August 2023.

HF Capital will invest about $50 million, while the Herbert Hunt family will make $25 million equity investment.

Westrock has also amended its existing $400 million credit agreement to increase its total net leverage financial covenant for a period of time not to exceed April 1, 2025, and to raise the minimum interest coverage ratio from 1.50x to 2.00x.

"Together, the equity investments and credit agreement amendment form part of a capital plan that allows us to not only complete the previously announced Phase 1 and 2 expansions, which consist of high-speed can and glass bottle lines, a multi-serve bottle line, and bag-in-box and bulk lines, but now, two additional can lines and an industry leading product development lab and FDA certified pilot plant to develop coffee, tea, and other beverages including dairy and plant-based milks to support our customers' innovation needs," said co-founder and CEO Scott T. Ford.

2023 Outlook: The company has cut its FY23 adjusted EBITDA outlook to be flat- up 10% versus 10% - 25% growth previously.

Chris Pledger, the company's CFO said, "This change in near term guidance is driven by external factors, such as product launch delays by certain customers in response to macro-economic uncertainty, and internal factors, such as the challenges we've experienced scaling our single-serve platform in the face of equipment delays in the first half of the year, and investments we are making to build out the infrastructure to support the launch of our extract and RTD facility."

Price Action: WEST shares are trading lower by 1.08% at $11.03 on the last check Friday.