Lion moots shelling out a further £80m to keep Findus afloat

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Lion Capital is pondering a further £80m to pay down debts in Findus Group after last week’s €22.8m (£19m) cash injection, The Grocer understands.

Findus averted a breach of its covenants in the final quarter of 2011 following the private equity backer’s cash injection, and after negotiating with lenders to waive certain financial covenants relating to Q4 in 2011.

The banks negotiated a 1% margin uplift on the group’s £700m debt pile, plus a 50bps fee, in return. The waiver - which prevented a potential covenant breach by Findus - follows a reset of Findus’s covenants in April last year, which also involved a cash injection by Lion.

A Findus spokesman said Lion was happy with recent trading. “Findus is trading encouragingly and in line with management expectations,” he said. But the value of Findus to Lion, without further funding, was zero, said a City source. “Assuming the value breaks into the mezzanine debt, Lion’s investment would be zero or, more precisely, option value once a restructuring has taken place.”

Lion had three options, added a second City source: “Lion can either inject further cash to ease the burden of repayments, initiate a debt-for-equity swap with lenders, or sell some or all of its operations.”

With Permira looking to offload Birds Eye Iglo, consolidation involving Findus is understood to be a key incentive for private equity groups pondering a secondary buyout.

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