It was Gandhi who said, “there are people in the world so hungry that God cannot appear to them except in the form of bread”. That is unlikely to apply to Robert Schofield, boss of the UK’s biggest food manufacturer Premier Foods. But he will no doubt be praying for a slice of bread-related good fortune of his own.

This month heralds the £15m relaunch of Hovis, the beleaguered bread brand Premier took on when it acquired RHM last year. With nostalgic packaging, a new range of smaller loaves and a two-minute epic TV advert set to debut during the prime time Coronation Street slot next week, Premier hopes Hovis, now its biggest brand, can revitalise the company’s as well as the brand’s fortunes.

But will the business’s gigantic debt prove an obstacle? In the company’s half-year results a fortnight ago, Schofield revealed the company’s debt mountain had grown to £1.8bn at the end of June, fattened by restructuring costs to its new RHM businesses, factory closures and soaring costs. Group sales rose 43.5% to £1.29bn, but pre-tax profit was only £3.6m after exceptional charges, significantly down from £5.1m.

Already jittery at the threat of recession, investors reacted nervously. Shares in Premier promptly tumbled 7%, though they’ve since bounced back.

Even if second-half profits did stage a recovery, the first priority for any business with a debt the wrong side of £1bn should be to reduce it, says Shore Capital analyst Clive Black. “The debt is Premier’s key constraint and it can be reduced by improving the performance of the business, ” he says. “Despite owning some of the most iconic brands in the country, such as Oxo, Branston and Mr Kipling, the majority of what Premier sells – own label, bread, ambient – has low growth potential. It’s difficult to see where the shift in revenue performance will come from.”

There is speculation the brands could be tempting acquisitions for other manufacturers keen to reap the rewards of a consolidating industry, but again, Black is sceptical. “At a time when credit is power, disposing of assets could prove problematic as businesses are currently being valued at below acceptable market rates,” he says.

However, despite the debt, Schofield believes the company has finally reached a turning point. “We’ve closed six factories and the rationalisation is ahead of schedule,” he claims. “Our spending on overall restructuring will drop by tens of millions. Everything we do now will generate cash.”

Whatever Premier’s problems, its cash-generating power should not be underestimated, adds Credit Suisse analyst Charlie Mills. “Premier has been coasting closer to its banking covenants than investors are happy about, but it still pays its wages, pays its bills and generates £50m cash profit per annum,” says Mills. “From 2009 it ought to start generating decent returns and tuck into that debt.”

Consumers are still buying most of its brands – last month’s results showed grocery division profits up 5.8% to £89m, despite the impact of higher ingredient costs – but not, it seems, Hovis. Bakery profits have dropped 23.2% to £14.6m in the last six months. The looming threat of further wheat price rises following another wet summer isn’t going to help the situation, but Schofield is adamant the relaunch will return the brand to market share growth.

By combining some new products with a return to old-style packaging, it is off to a good start, believes Dragon brand consultant Pippa Nordberg. “It’s a clear heritage-based proposition showing simple, natural goodness,” she says. “The relaunch ties in well with current trends and concerns.”

The credit crunch may even play into Hovis’s hands as consumers seek solace in the sorts of product they used to eat in the good old days before the dark clouds of recession loomed. Schofield will certainly be hoping so.