Findus prepares dividend payout through PIK notes

Mikkel Stern-Peltz
28 July 2014

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Private equity-backed frozen foods group Findus is preparing to pay its owners a тЌ200m dividend through a PIK note that ratings agencies believe could default.

The company is backed by Lion Capital, JP Morgan and Highbridge Capital Management.

Fitch announced it will assign the PIK note a CC expected debt rating, and the PIK-issuing holdco an Issuer Default Rating of CCC, which the ratings agency defines as a real risk of default.

Though the interest on the instrument can be repaid in cash, Fitch says it expects the notes to be repaid in kind, as a consequence of the company's limited financial flexibility.

Findus is raising this high-risk debt instrument just two years after it underwent a major debt restructuring, and just one year after it issued £410m of bonds to repay senior debt and refinance existing credit facilities.

Previous funding
In 2012, Lion Capital relinquished its controlling stake in the company to JP Morgan and Highbridge, as the two mezzanine holders injected £150m for a 50% stake, as part of the debt restructuring. As a result, Lion's stake fell to a third of the equity.

Lion acquired Findus in 2008 – then named FoodVest Group – from CapVest for £1.1bn, with JP Morgan underwriting a debt package of £550m senior debt, as well as a £60m revolving credit facility and a £180m mezzanine facility.

Before the sale to Lion, CapVest had been growing FoodVest through bolt-ons. Most notable among these deals was the acquisition of Findus from EQT in 2006, for around SEK 5bn.

Company
Findus is one of Europe's largest producers of frozen foods and operates in the UK, the Nordic region and southern Europe. It employs 6,000 staff and had a turnover close to £1bn last year.

In 2013, Findus was embroiled in a scandal when tests found the company's beef lasagnas contained as much as 100% horse meat.

The group was formed by a number of acquisitions and divestments made after EQT bought the company from Nestlé in 2000, but the original Findus was founded in Sweden in 1941. The company also includes seafood business Young's, which was founded in the UK in 1805.

People
James Hill is the CEO of Findus. Lyndon Lea is partner at Lion.