Premier linked to £300m cash call

Shares in the owner of Hovis bread and Mr Kipling cakes slid today following speculation it will ask shareholders for a £300 million New Year boost.

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Hovis owner Premier Foods is considering a rights issue as part of plans to tackle its debt mountain.

Shares in the owner of Hovis bread and Mr Kipling cakes slid today following speculation it will ask shareholders for a £300 million New Year boost.

Premier Foods is reportedly considering the fundraising rights issue as part of a revamp that the company hopes will address debts of approaching £1 billion and see off the attentions of Wall Street vulture fund Apollo.

The Sunday Times said that chief executive Gavin Darby, who took the helm 10 months ago, is also mulling a further pension payment holiday and substantial bond issue in an effort to "turn Premier into a normal company again in 2014".

Shares in the company fell by 11% today as investors faced having to stump up £300 million for a rights issue that will dilute existing holdings. The company's market value of £285 million is dwarfed by the size of its debt pile.

The newspaper said the plans may be complicated by Apollo, which has scooped up £100 million of Premier's loans. In 2009, the investor took control of biscuit maker Burton's after it fell foul of its bank agreements.

As well as a rights issue to shrink the debt, Premier is expected to refinance the rest in order to shrink the size of its bank syndicate from 29 to half a dozen.

Mr Darby, who was formerly boss of Cable & Wireless Worldwide, is also expected to open talks with pension trustees about extending a two-year payments holiday due to expire this month. The deficit is currently £395 million.

St Albans-based Premier recently confirmed it is in talks to bring in an outside investor to revive its Hovis br ead division. It has sold a number of businesses in the last year, including Sarson's vinegar and Haywards pickles. The company's other brands include Oxo, Batchelors and Ambrosia.

Premier confirmed that a rights issue was one of the options under consideration.

It said: "The group's bank debt and revolving credit facilities are in place until mid-2016. As previously stated in the group's half-year results in July, the board continues to review the full range of options available to the group regarding its future capital structure.

"The group confirms that this review is ongoing and, while it includes the possibility of a rights issue, no decisions have been made at this stage."