Premier Foods drinking at last-chance saloon, warns analyst

13 March, 2012

Premier Foods is drinking in the last chance saloon, according to a leading City analyst, despite announcing a refinancing deal with its lenders.

Yesterday, Premier, the food group behind Hovis and other brands, revealed its banking facilities of £1.2bn had been extended from December 2013 to June 2016, that it had secured a loan of £200m, via interest swaps, and trustees of its pension had agreed to defer deficit contribution payments until 2014.

Overnight, the move has been broadly welcomed by the City, despite the company shedding a number of  brands and warning on its full-year numbers,

Martin Deboo, analyst at Investec Securities, said: “We will have to wait for the detail, but the nexus of the refinancing is already clear enough. Banks, counterparties and pensioners will defer their calls on cashflow (plus accept some default risk) to give the new team the opportunity to forge a more valuable future.

“The quid pro quo remains undisclosed for now, but there will be one. Its financiers clearly don’t want Premier to fail. But will its consumers and customers now show it enough love? We remain holders, but supportive ones.”

And he warned: “So the saloon in which Premier is drinking has proved to be hosted by a patient and accommodating bartender, as we had been expecting all along. But this is still a last-chance saloon, make no mistake. Over to CEO Clarke and CFO Moran to explain to the market how they are going to avoid crying into their shot glasses come last orders in 2016.”

Clive Black, an analyst at Shore Capital, added: “We deem this to be good news because, frankly, Premier could not press on as a business until its balance sheet matters were more robust.”





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