Mystery surrounds recent reports that Premier Foods has sold £100M worth of its debt to US private equity house Apollo Global Management.
Premier Foods brands include Hovis, Mr Kipling and Ambrosia
The story originated from US media outfit CNBC, which carried quotes purporting to be from Premier Foods’ finance director Mark Moran.
According to the article, Moran had acknowledged the debt purchase, equivalent to $155M, but would not reveal the identity of the purchaser, which CNBC named as Apollo Global Management.
FoodManufacture.co.uk understands that while the transaction went ahead, Apollo Global Management was not directly involved. However, the true identity of the purchaser remains shrouded in secrecy at this stage.
Highly leveraged businesses
So-called highly leveraged businesses (those with large borrowings, such as Premier Foods) sometimes seek to sell some or all of their loans to finance firms offering better rates than their existing lenders.
While this would not mean it had reduced its debts, if Premier Foods has cut a good deal, it may now be in a more favourable position to move forward with growth plans. In addition, similar transactions may offer the beleaguered business future hope.
When quizzed by FoodManufacture.co.uk over the press reports, which surfaced less than two weeks ago, Premier Foods and Apollo Global Management separately responded: “No comment.”
Debt mountain
After Premier Foods announced its first quarter financial results in April, Shore Capital analysts Darren Shirley and Clive Black estimated its debt mountain would be £850M by the end of 2013.
The grocery giant, which makes food brands including Mr Kipling cakes, Hovis bread and Ambrosia custard and rice pudding, is also known to have high pension liabilities.
However, Black and Shirley described its first quarter figures for the three months to March 31 as “sound results in a tough enough market”.
The company reported sales of its power brands up 3.5%, representing five successive quarters of growth, and total sales up 1%. Black and Shirley forecast 2013 pre-tax profit would be £145M for the business.
