Premier Foods faces fire sale of assets, analyst claims

20 March, 2012

Premier Foods could be forced into disposing of assets in “near fire-sale conditions”, a leading City analyst has claimed.

Trading at the embattled company, which yesterday revealed it had written down the value of its bread business by £282m, was “worse than anticipated” said analyst Martin Deboo, of Investec Securities.

And he warned that its much-lauded refinancing deal would only give the company a short amount of breathing space.

Deboo said: “The saga continues. FY11 trading was below our (low) expectations and the refinancing will be coming at a cost, as we anticipated. After a couple of years’ breathing space, the financing costs start to ratchet up and Premier will be under bank-imposed pressure to realise disposals. So CEO Clarke and his team have precious little time to turn around this business.”

And he warned the refinancing deal – which saw its banking facilities of £1.2bn be extended from December 2013 to June 2016 – and the repayment structure served to remind of “the sheer mountain Premier has to climb”.

In a note, Deboo continued: “Weighing against this, trading performance is very weak, particularly in the bread and milling business that will comprise 40% of Premier’s sales going forward. Much damage has been done to trading momentum in a climate where major retail customers cannot be expected to be accommodating.

“And the refinancing comes at a material immediate cost and hefty deferred costs. Finally Premier will be under pressure to dispose of businesses representing around a quarter of its current Enterprise Value in near-fire sale conditions.”





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