The firm announced today (November 7) that it has concluded a deal with its banking syndicate that will see the test date deferred from December 31 to the end of March next year.
This agreement forms part of the firm’s discussions about longer term refinancing of its debt and confirms on-going support for the business, a Premier statement revealed.
Michael Clarke, ceo of Premier Foods said: “This is an important step towards securing a longer term financial foundation for the business. I am very pleased that after sharing our vision and high-level plans, our banking syndicate has confirmed its support.”
Build momentum
“In recent weeks, we have set out our priorities and made significant leadership changes to strengthen our focus. We are now moving quickly to finalise our detailed growth plans to ensure we continue to build momentum in the business.”
The firm announced in October that it was working with financial services firm, Price WaterhouseCoopers in “constructive discussions” with its banks to refinance debt facilities beyond the end of December.
Premier has said that these discussions “continue to be constructive” and that its banks “remain supportive” of the business .
The firm currently has a covenant agreement with its banks to achieve earnings before interest, taxes, depreciation and amortisation that is 2.7 times greater than its interest charges.
Renegotiating
Renegotiating these terms is a key factor in restoring the firm to stability, said analysts. They predicted Premier was unlikely to meet the conditions at the end of this financial year.
Premier’s clean debt currently lies at over £1bn, with a pension deficit of £535M, meaning the firm’s enterprise value is accounted for by debt which, analysts say, will “leave nothing” for shareholders.
This welcome breathing space for the firm follows Clarke’s decision to restructure the business and appoint two new mds.
The firm announced on October 31, that the reshuffle would see the business split between the grocery business and the new-look bakery business under the stewardship of new boss’ Iwan Williams and Graham Hunter.
Analysts are still predicting a long battle for Premier but were in agreement that refinancing was vital if Clarke is to lead the firm to recovery.
Meanwhile, as the new-look Premier seeks to build up momentum under Clarke, rivals Greencore are remaining tight-lipped on press reports that name US private equity firm Clayton Dubilier and Rice as the mystery suitor of the Irish food supplier.
The firm refused to comment after The Sunday Times claimed CD&R was in “detailed discussions” with Greencore after weeks of speculation about the bidder’s identity.