UK: Premier completes swap restructuring
Premier Foods plc has completed the restructuring of its interest rate swap portfolio, in line with its financial strategy announced in August.
"The restructuring achieves de-risking by considerably shortening the maturity of the portfolio, removing early termination options and eliminating the volatility of the digital swaps," the company said in a statement. The cost of the restructured swaps is a gross cost of GBP167m (US$263m) in line with the current mark to market.
The company said it has agreed a settlement profile of this amount between now and 2013 which it believes is affordable given its strong cash generation.
Under the existing swap portfolio certain of Premier's swaps had maturities extending to 2037 and a portion of the portfolio had the effect that, as interest rates fell, the interest cost of that portion increased without any offsetting reduction in the cost of the company's bank debt.
The company explained that the swaps therefore created an unhedged exposure to certain interest rate movements which could have cost the company up to GBP450m. In return for agreeing to pay the current mark to market cost of GBP167m, the restructuring removes this risk.
The crystallised mark to market will be settled between now and 2013 when the bank facility is due for renewal. Accordingly, £8m will be paid in 2010, £33m will be paid in 2012 and the remaining £79m will be become due at the end of 2013 and, in effect, will be refinanced at that time.
"The de-risking achieved through the restructuring now facilitates the company's seeking a credit rating which, in turn opens up the possibility of raising funds in the bond market. The company intends to investigate this avenue as part of its strategy of diversifying its sources and maturities of funding," the statement added.
Jim Smart, chief financial officer said: "The restructuring of the swap portfolio is an important step in delivering a more stable financial structure. Its successful completion removes a considerable amount of financial risk and volatility from our balance sheet. This, together with the pensions change announced in August 2010, achieves substantial progress towards the de-risking objective of our financial strategy and opens the way to diversifying our sources of funding."
Companies: Premier Foods plc
just-food's exclusive partnership with the Consumer Analyst Group Europe conference last week provided us with the chance to hear how the likes of Nestle, Danone and Unilever viewed the current tradin...
So, what now lies ahead for Greencore, the Ireland-based convenience food group?...
Ranjit Boparan looks set to seal control of Northern Foods next week, having trumped the merger offer made by Irish food group Greencore late last year. Ben Cooper reports....
This week featured the surprise news that Morrisons acquired a stake in US online grocer Fresh Direct, while Greencore was outfoxed in its bid to acquire Boparan. Meanwhile just-food attended the West...
Perhaps the biggest M&A story in the UK food sector this week reached the final chapter when Ireland's Greencore gave up on its pursuit to buy UK rival Northern Foods....
- Focus: Nestle CEO plan to balance sales, earnings
- Does Kraft Heinz want to swallow Unilever whole?
- Will Kellogg's DSD exit help it grow in US snacks?
- Is Mondelez's margin target hurting sales?
- Why Reckitt Benckiser moved for Mead Johnson
- Nestle plans restructuring as 2016 profit misses
- Aryzta CEO, CFO resign amid strategic review
- Danone eyes efficiency, agility with new structure
- Kraft Heinz pursuing Unilever in takeover move
- Kraft Heinz returns to organic growth, ups margins