UK: Premier linked to £300m cash call

Premier Foods Premier Foods

Monday, December 23, 2013
11:22 AM

Shares in the owner of Hovis bread and Mr Kipling cakes slid today following speculation it will ask shareholders for a £300 million New Year boost.

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Premier Foods is reportedly considering the fundraising rights issue as part of a revamp that the company hopes will address debts of approaching £1billion and see off the attentions of Wall Street vulture fund Apollo.

Chief executive Gavin Darby, who took the helm 10 months ago, is reportedly also mulling a further pension payment holiday and substantial bond issue in an effort to “turn Premier into a normal company again in 2014”.

Shares in the company fell by 11% today as investors faced having to stump up £300million for a rights issue that will dilute existing holdings. The company’s market value of £285m is dwarfed by the size of its debt pile.

A national newspaper said the plans may be complicated by Apollo, which has scooped up £100m of Premier’s loans. In 2009, the investor took control of biscuit maker Burton’s after it fell foul of its bank agreements.

As well as a rights issue to shrink the debt, Premier is expected to refinance the rest in order to shrink the size of its bank syndicate from 29 to half a dozen.

Mr Darby, who was formerly boss of Cable & Wireless Worldwide, is also expected to open talks with pension trustees about extending a two-year payments holiday due to expire this month. The deficit is currently £395m.

St Albans-based Premier recently confirmed it is in talks to bring in an outside investor to revive its Hovis bread division. It has sold a number of businesses in the last year, including Sarson’s vinegar and Haywards pickles. The company’s other brands include Oxo, Batchelors and Ambrosia.

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