Greencore is in talks to renegotiate EUR 400 million debt

Greencore Group plc, the malt, sugar and foods Company, plans to refinance its entire bank debt of EUR 350-400 million in the near future, The Sunday Business Post communicated on May 8.

The refinancing will be the second time in just over a year that Greencore has agreed new terms with its banks. Market sources suggest that Greencore's debt last year attracted a margin of about 80 basis points. The company may be looking for the terms to be improved by about one fifth.

Greencore is believed to be keen to take advantage of a tightening in margins in the banking market over the last year, and to utilise an improved credit rating following debt reduction.

In the face of a patchy performance on the earnings front, Greencore has placed great store in its ability to significantly deleverage the company following the landmark EUR 258 million acquisition of Hazlewood in 2001.

Greencore had reduced debt from EUR 874 million to EUR 387 million by the end of its last financial year on September 30, 2004. The changing debt profile included a private placement of $302 million in October 2003.

The company had a net interest bill of €38.8 million in 2004,with the combination of the last refinancing round and ongoing debt reduction helping it to reduce its net interest repayments last year by 21 per cent.

However, the steady progress on debt repayment is expected to grind to a half this year, following the decision by Greencore earlier this year to close the sugar plant at Carlow. This will result in a €65 million exceptional charge in the 2005 accounts, including a EUR 26 million cash cost.

The overall impact of restructuring should see net debt staying well above EUR 350 million in 2005, stifling attempts to get the annual net interest bill down to about EUR 30 million unless the company can renegotiate more favourable terms with its bankers.

Greencore has not made a decision on what it will do with the 320 acre site in Carlow. The site could fetch about EUR 30 million, although an exceptional gain is unlikely to be booked into accounts until 2006 at the earliest.

The company is due to announce on May 25 results for the six months to March 31, 2005. Shares in Greencore closed at EUR 3.25 on May 6, up 7.5 cent since January.

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