UPDATE 1-Premier Foods unveils $1.9 bln refinancing plan

Tue Mar 4, 2014 5:29am EST

By Neil Maidment

LONDON, March 4 (Reuters) - Britain's Premier Foods announced a 1.13 billion pound ($1.89 billion) refinancing plan on Tuesday as part of an ongoing restructuring aimed at reducing its debts and reviving the business.

The maker of Mr Kipling cakes and Bisto gravy has spent the past few years selling assets, reshaping its business and cutting costs to help reduce debt built up during an acquisition spree, switching its focus to growing its top grocery brands.

In an expected move, the firm said it would raise a total of 353 million pounds via a placing of new shares and a rights issue, and a further 475 million pounds through a bond issue.

It said it had also secured a new 300 million pound banking facility, reducing its lending syndicate from 28 to 7 parties, and had struck a new pensions agreement.

In January, Premier Foods said it would hand control of its struggling Hovis bread business to U.S. investment firm The Gores Group, in a deal it believes will allow for greater investment in the division, and free-up its focus on groceries.

"What we've been working on is a strategy to take away in one fell swoop the three big issues that have over-burdened our company; uncertainty over bread, the scale of our debt and the scale of our commitment to the pension scheme," Chief Executive Gavin Darby told Reuters.

"This new capital structure will liberate Premier Foods from its past and provides a great platform on which to execute our category based strategy," he said.

Premier Foods, whose eight best-selling brands also include Batchelors and Ambrosia, said it would raise 100 million pounds by placing 77 million shares at 130 pence apiece, while an 8 for 5 rights issue of 507 million shares at 50 pence would raise 253 million pounds.

The capital refinancing plan is subject to approval by shareholders at a meeting on March 20.

Darby said the new six-year pensions agreement would see the firm reduce cash payments by 156 million pounds over the next three years, when compared with its previous deal.

Group net debt at Dec. 31, 2013 stood at 830.8 million pounds, the firm said, and when adjusted for the refinancing fell to 513 million pounds, taking group net debt to core earnings (EBITDA) down from around 5 times to 3.3 times.

Premier Foods said it had agreed with lenders to pay a dividend to shareholders when the ratio falls below 3 times.

Its shares were down 5 percent to 133 pence at 0944 GMT.

The company also posted on Tuesday a 12.3 percent fall in 2013 trading profit to 139.5 million pounds. Stripping out the contribution of disposed businesses during the year, trading profit rose 17.7 percent to 145.2 million pounds.

The group said it was confident of its prospects for 2014.

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