S&P rates Premier Foods notes B

S&P said it assigned a B issue rating and 4 recovery rating to the proposed £210 million senior secured floating-rate notes maturing in 2022 to be issued by Premier Foods Finance plc, a subsidiary of Premier Foods plc (B/stable).

The 4 recovery rating indicates an expectation of recovery prospects in the range of 30%-50% (rounded estimate: 35%) in the event of a default. The recovery rating is supported by the comprehensive security package (which includes tangible assets and share pledges) but constrained by the sizable senior secured debt and pension deficit.

The draft documentation of the proposed senior secured notes mirrors the terms of the existing £175 million senior secured notes maturing in 2020.

Premier Foods will use the £210 million proceeds, together with existing cash, to repay its existing £175 million senior secured notes, prepay £35 million drawings under the existing revolving credit facility and cover about £5 million of transaction fees.

Via this refinancing, Premier Foods is also downsizing the existing revolver to £217 million from £272 million and extending the maturity to December 2020 from March 2019. From March 2019, the amount will decrease to £184 million.

The B issue rating and 4 recovery rating on the existing £325 million senior secured fixed-rate notes and £217 million senior secured revolver are unchanged. The 4 recovery rating continues to indicate expectations of average recovery (30%-50% range; rounded estimate: 35%), and is supported by a strong security package, which includes tangible assets.

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