Bakkavor told just-food there were a number of reasons behind the decision to hold the negotiations

Bakkavor told just-food there were a number of reasons behind the decision to hold the negotiations

UK own-label manufacturer Bakkavor is in talks with its lenders to negotiate an early conversion of outstanding bank debts into equity and to reorganise its corporate structure.

The boards of Bakkavor Group and Bakkavor Finance (the group's UK operating company) are leading the talks on a GBP380m (US$615.3m) syndicated bank facility, with a view to agreeing a reset of the company's leverage covenant and making the necessary amendments to lead to a corporate re-organisation.

A spokesperson for Bakkavor told just-food there were a number of reasons behind the decision to hold the negotiations.

"Bakkavör's motivation for this move is to firstly accelerate the conversion of its convertible loans at EHF (Bakkavör's parent company) to equity, a process which would have otherwise occurred on 30th June 2014," the spokesperson said.

He said the early conversion of Bakkavör's convertible loans at EHF to equity will "instantly reduce" debt at the group level and "eliminates the refinancing uncertainty" at Bakkavör's parent company before 2014.

The spokesperson explained the talks also involved changing the corporate structure of Bakkavor. The company is proposing to change its parent company. Iceland-based EHF, to one incorporated in the UK with a single class of equity.

"These moves will remove stakeholders' concerns about the Icelandic holding company structure and enhance flexibility around sourcing additional equity should it be needed in future," he said.

Bakkavör said the reset leverage covenant offers the company "flexibility" with which to operate, allowing management to "focus on executing strategy".

The spokesperson said it does not foresee a breach for Bakkavor under the original leverage ratio covenant.