Branston pickle-maker Premier considers debt-reduction move

The maker of Branston pickle and Hovis bread today said it was looking at ways to speed up the reduction of its £1.8bn (€2.3bn) debt mountain.

Premier Foods said it had been approached by several parties with proposals for tackling its borrowings. It did not provide further details, but the announcement comes a day after it was reported the company was in detailed talks with CCMP Capital, formerly the private equity arm of JP Morgan, about it making a capital injection worth several hundred million pounds.

The Sunday Telegraph said Premier had turned to prospective investors because the current climate made it difficult to refinance existing debt.

Premier’s share price has fallen sharply amid concerns about the level of debt on its balance sheet after recent mergers with RHM and the UK arm of Oxo and Homepride company Campbell’s Soup.

The impact of higher commodity prices on its working capital, and lower proceeds from property sales have also impacted on the debt position.

However, the group said in July that it met its financial covenant tests at the end of June and that it expects to continue to operate within them.

Premier’s board is said to believe that a reduction in its debt burden would allow the City to re-rate it shares at a time when defensive stocks such as food companies are likely to find more favour among nervous investors.

Shares rose 13% today as investors welcomed the potential move.

The company said: “Premier Foods confirms that it continues to examine ways of accelerating the reduction of Group debt. In recent months, the group has been approached by several parties with proposals in line with this stated priority.

“The group is examining these proposals amongst other options and a further statement will be made as and when appropriate.”

Yesterday’s report said a deal with CCMP could yet be abandoned in favour of another option, such as asset sales or an investment from another party. Lion Capital, a former owner of Premier, Kohlberg Kravis Roberts and Permira are among the other private equity options.

Other brands in the Premier estate include Mr Kipling, Sharwood’s, Quorn and Batchelors.