Shares in Aryzta jumped as much as 18 per cent on Tuesday as the Swiss-Irish baked-goods group said that a group of investment banks have conditionally signed up to guarantee its planned €800 million share sale later this year.
The beleaguered company also said that its lenders have agreed to amend covenants around its debt facilities, and that it is nominating three new directors to its board as part of a major turnaround plan.
Shares in the company surged to as high as €9.06 in Dublin, recovering a fraction of their almost almost 90 per cent decline in the past 3½ years as a result of a series of profit warnings, disappointing financial reports and concerns about its debt mountain.
The Cuisine de France owner said on Tuesday it had entered a standby underwriting agreement with Bank of America Merrill Lynch, UBS, Credit Suisse, JP Morgan and HSBC in relation to its planned share sale in the fourth quarter, as the company seeks to lower its debt burden and get some breathing space as it sells non-core assets.
Underwriting agreement
Announcing the date of its annual general meeting (agm) as November 1st, Aryzta said the underwriting agreement was subject to conditions including the “absence of any any material adverse developments”.
Aryzta, which supplies burger buns to clients including McDonald’s, had net debt of €1.6 billion at the end of January and analysts recently suggested rising raw material costs threatened to compound the problems mounting up at the business.
Aryzta’s also received the consent of the majority of its lenders to change existing covenants “to provide additional flexibility to pursue its new business strategy and implement a share capital increase as part of its deleveraging plan”.
Making progress
Analyst Andreas von Arx of Baader Helvea said the deal with banks and lenders “shows Aryzta is making progress towards the capital increase” and helped to reduce uncertainty.
“The amended credit conditions should provide the flexibility to execute on the turnaround measures,” Mr von Arx wrote in a note to investors. Even so, he is sticking with his “hold” rating, as Aryzta has failed repeatedly to deliver on priorities of selling assets or stabilizing results. “For the time being there remain too many unknowns to credibly forecast a mid-term valuation,” he said.
The Swiss-Irish food group has nominated three new independent directors to its board while entering into a consultancy agreement with director Jim Leighton.
Mr Leighton, who joined the board at the 2017 agm, has been providing advice on Aryzta’s three-year €200 million cost reduction plan and can therefore no longer be considered independent.
The three newly-nominated directors include former McDonald's executive Michael Andres, who served as president of McDonald's USA up to 2017. "Michael brings a deep understanding of consumer markets globally, and North America in particular, to Aryzta," the company said.
The chairman of US frozen consumer foods company Green Chile Foods, Gregory Flack, also joins the board alongside Tim Lodge, a former Tate & Lyle executive.
“We are pleased to announce the nomination of three new directors to the Aryzta board of the calibre of Michael Andres, Gregory Flack and Tim Lodge. Each brings significant and diverse industry experience which will be invaluable to the board as we deliver on what is a multi-year turnaround,” said Aryzta chairman Gary McGann.
