Premier in £1bn loan renewal deal

The UK’s largest food manufacturer has hammered out a deal with its banks – including part-nationalised lenders Lloyds and Royal Bank of Scotland – which will see its repayment deadline extended from December 2013 to June 2016.

The refinancing package, to be formalised by the end of the month, will allow the St Albans-based company to execute its strategy, which involves focusing investment on eight ‘power’ brands, including Oxo and Bisto.

The group was brought to the brink by debts amassed on an expansion spree that saw it buy Hovis bread firm RHM for £1.2bn in 2007 and Campbell’s UK and Irish business, adding Batchelors, Homepride and Fray Bentos to its catalogue in 2006.

Premier Foods reiterated its expectations for 2011 results to be at the lower end of market expectations as it looks to stabilise the business.

The group is expected to sell off a number of brands as part of its new deal, with Sarson’s vinegar and Hartley’s jam reportedly on the list for potential sale.

Premier’s shares were 258p five years ago and sunk as low as 3p in November before recovering to 11.67p yesterday, valuing it at nearly £280m.

The group recently embarked on a major television advertising drive as part of more than £50m of marketing due this year to promote its main brands.

Premier announced in January that it needs to cut 600 jobs – five per cent of its workforce – in a bid to save £40m by next year.