Premier Foods confirms review of refinancing options

By Michael Stones

- Last updated on GMT

Premier Foods was predicted to be on the brink of unveiling a £750M plus refinancing package
Premier Foods was predicted to be on the brink of unveiling a £750M plus refinancing package

Related tags Premier foods

Premier Foods is continuing to review its refinancing options, the food manufacturing giant confirmed today (March 3), after weekend press reports claimed it would reveal a deal worth more than £750M this week.

The firm acknowledged press comments about a potential capital restructuring, adding: “The group confirms that, further to the announcement made on December 23 2013, it continues to review the options available to the group regarding its future capital structure …”  ​Premier said it planned to update the market alongside the announcement of its full-year results for the year ended December 31 “in due course”.

Its comments followed claims that management were putting the finishing touches to a £750M refinancing deal, according to the Financial Times​. The report predicted Premier Foods would unveil a rights issue of more than £350M, which exceeds its stock market value of £345M.

Premier Foods’ net debt

The business was also said to be finalising a corporate bond issue of about £400M. The funding was needed to help reduce Premier Foods’s net debt, which reached about £890M at the end of last June.

City analysts have long predicted Premier Foods would be forced to agree a new refinancing package​. Shore Capital predicted in January that a combination of a rights issue and corporate bond would be Premier Foods’s preference.

Its analysts Clive Black and Darren Shirley said a successful refinancing package would allow management to focus on day-to-day operations. “We believe that a refinanced Premier Foods, with lower and less costly ongoing debt, embracing a more manageable banking structure, to be highly desirable for its share price,” ​they said in January.  

“Additionally, with balance sheet engineering out of the way, management can firmly concentrate on ‘the day job’.”

Investment rating

Premier Foods’s net debt was estimated by the City to have dropped to about £860M by the end of last year. That represents about five times earnings before interest, tax, depreciation and amortisation (EBITDA), according to the Financial Times​. Net debt will need to drop to three times EBITDA to trigger an upgrade in an investment rating.

It was also claimed the manufacturer was close to agreeing a deal that would allow the rescheduling of pension payments, in a bid to ease the burden of its £395M pension deficit.

In January Premier Foods sold unveiled a £87.5M joint venture with the US-based Gores Group to run its troubled Hovis bread and flour business​. 

The deal is expected to result in Premier retaining a 49% stake in the business and to generate a short-term cash inflow of about £28M, which will be invested in its grocery business.

The bread business will operate as a stand-alone joint venture, which will trade under the name of Hovis Limited.

Meanwhile, after the Hovis joint venture, Premier's business strategy continues to focus on developing sales of its seven remaining power brands: Ambrosia, Mr Kipling, Sharwoods, Loyd Grossman, Bisto, Oxo and Sharwoods.  

Related topics Business

Related news

Follow us


View more