Palmer & Harvey has completed its latest round of re-financing with its lenders including tobacco giants Imperial Brands and Japan Tobacco International.
The troubled wholesaler announced this morning that this included the extension of trade credit facilities with existing lenders, Imperial Tobacco and Japan Tobacco International. In a statement P&H said the new deal “does not change our commercial relationship with Imperial Tobacco or Japan Tobacco and we look forward to continuing to work with all our suppliers and retail customers to deliver high levels of service, making the most of our scale and knowhow, and to further developing our valued relationships”.
The tobacco suppliers have been locked in refinancing talks with P&H and sits financiers, including Barclays and Royal Bank of Scotland, for months. One of the options on the table involved them taking an equity stake in the business. However this was rejected in favour of them acting in a guarantor capacity for some of the wholesaler’s borrowings through trade credit as they have done previously.
“The refinancing provides us with a strong financial position from which to drive forward Palmer & Harvey and to take advantage of the many opportunities we see in the wholesale and convenience markets,” said P&H CEO Tony Reed.
A spokesman for JTI added: “JTI is pleased to have agreed terms with Palmer & Harvey for their debt refinancing and we look forward to them continuing as a major wholesaler of our products.”
The path for completing the refinancing was cleared last week, when P&H agreed a three-year extension on its key tobacco contract with Tesco.
Tesco’s proposed £3.7bn merger with Booker threatened to deliver a mortal blow to P&H as the Tesco contract is understood to represent around 40% of its turnover.
The deal covers the distribution of tobacco and associated products, as well as stamps, to every Tesco retail site in the UK, ambient non-tobacco lines to Tesco forecourts, and frozen food lines to more than 1,700 Tesco Express stores.
“We look forward to building on our long-standing partnership with Palmer & Harvey, and continuing to work and innovate with them to serve our customers better,” said Tesco UK distribution director Andrew Woolfenden.
Commenting on the Tesco deal, Reed said: “We are delighted to further extend our multi-year relationship with Tesco and look forward to working with the Tesco team to maximise efficiency and provide great service over the coming years. The combination of resources from the two businesses is proven to deliver a first-class retail offer for Tesco customers.”