Premier Foods bank deal in “last chance saloon”

Under the terms of the package, banking facilities of £1.2bn have been extended from December 2013 to June 2016. Covenants have also been re-set to reflect the group’s growth priorities of focusing investment behind eight Power Brands, reducing its costs and its disposals programme, said Premier.

Deboo concluded: “The saloon in which Premier is drinking has proved to be hosted by a patient and accommodating bartender… But this is still a last chance saloon, make no mistake. Over to ceo ​[chief executive officer] Clarke and cfo​ [chief financial officer] Moran to explain to the market how they are going to avoid crying into their shot glasses come last orders in 2016.”​

Vote of confidence​

But he added: "Premier’s new management team get a minimum of two years relatively free from pressures to implement their plan to turn the business around. This feels like a big vote of confidence to us.”​

Deboo told FoodManufacture.co.uk that, until this week, Premier had two main issues that needed to be resolved. “One was agreeing a refinancing package and the other was sorting out its trading performance. So effectively, chapter one is now closing and chapter two is now open and will need addressing, ”​ he said.  

Premier said it had received “unanimous consent”​ from its banking syndicate and pensions schemes. It is now awaiting the signature of the final documents, which are expected at the end of the month.

According to a statement from the firm: “The total interest rate swap portfolio, including previously restructured swaps, will be restructured into an additional term loan of approximately £200M.​

“This will have the effect of reducing the group’s interest expense. Additionally, the trustees of the group’s pension schemes have agreed to defer deficit contribution payments until 2014.”​

Market expectations​

Despite the new terms, Premier said it expected its overall financial results for last year to be “at the lower end of market expectations”.​ But it stressed that it remained focused on stabilising the business and investing in its recovery and future growth.

Jeff Stent, analyst at Exane BMP Paribas, added: “The devil is always in the detail with these things. The fact that Premier has agreed a new refinancing deal is no surprise and it’s a positive development. But really it is all dependent on how trading progresses over the next few years.”​

The news comes after intense speculation that a re-financing deal for the firm was imminent.  

However, the firm remained silent on any potential agreement, following reports in The Sunday Times​ two weeks ago that a deal had already been secured.