Premier Foods set for £400m cash call

Premier Foods, the maker of Hovis bread and Bisto gravy, is expected to use today's announcement of full-year results to detail a £400m rights issue. The group will also confirm that the private equity firm Warburg Pincus is to take a stake in the company, which could be as high as 10 per cent or 20 per cent, depending on the success of the capital raising.

Premier Foods has debt of £1.78bn, which has been accumulated from a series of acquisitions in the past few years, including the £1.23bn takeover of RHM in 2007. The group's shares have lost 73 per cent of their value in the past 12 months as investor and analyst concerns grow about the company's ability to repay lenders. The stock was up 14 per cent yesterday as details of the cash call emerged.

Citigroup analysts predict that the group will be announcing sales growth of 8 per cent and pre-tax profits of between £185m and £190m.