Premier Foods has confirmed that it is looking into ways to accelerate debt reduction.

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The company told just-food that it is in talks that could result in a cash injection from the private equity industry, allowing the UK food group to alleviate its huge debt burden.


The maker of Hovis and Quorn had debts of GBP1.8bn (US$3.1bn) at the end on June due to acquisitions in 2007, including its purchase of rival UK food group RHM and the UK operations of Campbell Soup Co. Premier’s debt levels compare to a market capitalisation of just GBP508.8m.


A combination of higher production costs and the downturn in consumer spending have caused concerns that Premier will not be able to service its debts.


The company has already cut its dividend and capital expenditure in a bid to conserve cash.

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However, as economic conditions worsen, Premier said that it is looking to speed its debt reduction initiatives.


“In recent months, the group has been approached by several parties with proposals in line with this stated priority,” it said. “The group is examining these proposals amongst other options and a further statement will be made as and when appropriate.”


While the company declined to comment on who it is in discussions with, The Financial Times cited CCMP Capital, the former private equity arm of JP Morgan, as a likely investor.


CCMP was not immediately available for comment.


News of the possible cash boost lifted the company’s shares, which have lost about two-thirds of their value since the beginning of the year. At 12pm (BST) Premier’s share price was up 6.55% to 61.00 pence. However, overall the London Stock Exchange was lifted by news of government investment to aide the ailing banking sector.