Premier Foods will pay out £167m over the next four years as a result of complex financial manoeuvrings that backfired on the company in the wake of the credit crunch.
The manufacturer will hand over the sum to its lending banks in staggered payments, with £11m due this year and £12m in 2011. The figures then rise substantially, with £47m due in 2012 and £97m payable in 2013.
The arrangement follows a series of interest rate ‘swap’ deals Premier agreed with its lenders in 2007 and 2008, which backfired on the company when global financial markets collapsed.
Chief financial officer Jim Smart told the Financial Times the company could have been exposed to losses of up to £450m without the revised payment plan announced today.
“People just didn’t envisage that interest rates would collapse in the way they did,” Smart said of the swap deals.
The news comes with Premier battling to address its billion-pound debt. Earlier this month the company put its meat-free business, which includes the market-leading Quorn brand, up for sale.
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Daily Bread: A meaty investment (4 October 2010)
Smart move for Premier as it names new FD (13 October 2009)