Greencore restructure debt

Greencore has refinanced its borrowings through the private placement of US$302 million (€260m) with nine institutional investors. This placement means that Greencore will have a longer period before having to repay the debt.

The average maturity of the new financing is now over nine years. The average interest rates are 5.47% for the US dollar notes and 5.76% for the sterling component. The US dollars have been swapped into sterling. US$130 million will have to be repaid in 2010, US$72 million in 2013 and US$100 million in 2015. The existing loans were due to mature over a five-year period.

The US$302 million in funding will be used to repay existing borrowings. The company's debt levels increased dramatically to fund the Hazelwood acquisition, but through asset disposals, and company sales, the debt level was down to just under €500 million in March of this year, at the half-year stage. Further progress was expected in the second half of the financial year. The group's full-year results are due to be published late in November.

Over the last few years Greencore's large interest bill has reduced the company's pre-tax profits down to historically low levels, despite reasonably good operating performances. Last year the interest bill amounted to €51.9 million. In the first half of the 2003 year the bill was €21.9 million.

Meanwhile, Dermot Desmond's move to increase his shareholding in Greencore created a bit of a stir. Late last Friday evening, his company IIU Nominees Limited announced that they had acquired an additional 6% of the ordinary shares in Greencore.

The purchase of these 11.36 million shares lifted Desmond's stake in the company to 22% (41.58million). The shares became available when Sprucegrove Investment Management Limited decided to reduce their holding in Greencore down to 0%.

Dermot Desmond has been a long-time investor in Greencore. A number of years ago he used his votes at the company's AGM to block the reappointment of the then chairman Bernie Cahill.

The company's financial results for the year to the end of September are due out later in November and are generally expected to be in line with market expectations.

Difficulties in the Rathbones bakery business and some problems in the pizza operations are expected to be offset by strong performances in the sandwich, quiche and prepared meals businesses.

The planned changes to the EU sugar policy is likely to have less of an impact on the overall Greencore business now than it would have had if it happened a number of years ago.

While the Hazelwood acquisition left the company with high borrowings and higher interest payments it has refocused the company on the growing prepared foods sector.