Premier Foods debt reduction reports ‘all supposition’

Media coverage on January 31, sparked by an initial Sky News bulletin, claimed Premier Foods had demanded that banks participating in a forthcoming capital-raising also agreed to throw loans into the pot. Credit Suisse, HSBC and Jefferies were named.

However, Investec analyst Nicola Mallard told FoodManufacture.co.uk the reports were “all supposition” ​and offered little that was new. “Everybody has talked about the rights issue for some time. There’s nothing new in this.”​

She said any material developments were expected to be announced when the company, owner of brands such as Ambrosia custard and Mr Kipling’s cakes issued its next trading statement.

Within six weeks​

According to reports in The Financial Times​, a rights issue of about £350M, aimed at raising money to help Premier Foods cut its debts, is expected to be announced within six weeks.

In a note, Shore Capital analyst Clive Black stated: “Shore Capital has envisaged a major rights issue from Premier Foods for some time.​

“​We have set an expectation that the group would undertake a fund raising amounting to circa 100% of the group's present market capitalisation (c£343M), so within a range of £250–350M, possibly with a circa seven year corporate bond of c£250–350M featuring as well.​

‘Greater visibility’​

“Such steps would, to our minds, reduce over-indebtedness, simplify what appears to be complex and onerous current lending arrangements and permit greater visibility to management with respect to finance costs for Premier Foods.”​

Once details of the rights issue were confirmed, Premier Foods could focus on other activity designed to further strengthen its financial position, such as cutting product lines and improving customer relations, said Black.

The company is also understood to be working on reducing the amount it is obliged to pay into its pension scheme, while still addressing its pension deficit.

Financial institutions reportedly working on a bond issue, which it is hoped could raise £250M for Premier Foods include Barclays, BNP Paribas and HSBC.