Iceland chill on Big Food Group

SALES at the Iceland Foods division of The Big Food Group plunged by 5.1% in the six weeks ending 10 May, confirming market rumours since March of a deterioration in trading that has hit its share price.

The group announced it had agreed a sale and leaseback of 31 of its properties for £129.3m to insurance giant AXA. BFG had been talking to British Land about selling and leasing back some 150 properties worth £250m to the property giant, 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.

Despite the poor trading figures BFG shares rallied by 16% to 99 3/4p, a rise of 13 3/4p, as hopes for a further refinancing and sale and leaseback programme rose. Earlier this year the shares hit a four-year low of 78p. Today 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.'

Another analyst said: 'Current trading still looks poor, but at below 100p a lot of bad news is already priced in. Bid rumours don't really go hand in hand with this company but at 80p there could be value there for third parties. In any case this amount of buying in the stock is good for confidence.'