Premier Foods bank deal in “last chance saloon”

By Mike Stones and Dan Colombini

- Last updated on GMT

Related tags: Chief executive officer

Premier's bank deal would buy it breathing space but no hiding place, said Martin Deboo
Premier's bank deal would buy it breathing space but no hiding place, said Martin Deboo
Troubled giant Premier Foods is still in “the last chance saloon” after it agreed a four-and-half-year re-financing package with its lenders this week (March 12), according to Martin Deboo, financial specialist with Investec Securities.

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.

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