Big Food rallies after Iceland chill

LIKE-for-like sales at the Iceland Foods division of The Big Food Group plunged by 5.1% in the six weeks ending 10 May, following market rumours since March of a deterioration in trading that hit its share price.

However, after adjusting for Easter, Iceland's sales growth was just positive at 0.1% and the shares rallied by 15 3/4p to 101 3/4p.

The market was also cheered by news of a sale and leaseback of 31 of BFG's properties for £129.3m to insurance giant Axa. BFG had been talking to other suitors about selling and leasing back some 150 properties worth £250m, but these talks collapsed. BFG planned to use cash from the sale and leasebacks to fund redevelopment.

Today the group said it had negotiated a £300m new senior debt facility with its bankers, led by Barclays and Royal Bank of Scotland. It also intends to raise £150m from the sale of high-yield bonds.

Proceeds from these measures and the property sale will be used to replace high-interest debt, which analysts believe could total £500m.

Earlier this year, the shares hit a four-year low of 78p. One analyst said: 'The Big Food Group now seems to be addressing its debt problem and this will come as a considerable relief. However, there must now be concerns about trading, which seems to be falling away.'