Broker snap: UBS downgrades Premier Foods to sell

14th Nov 2011 10:31

UBS has downgraded struggling food manufacturer Premier Foods from neutral to sell, saying it's "difficult to see a way back from here".The group announced last week that it had negotiated a deferral of the next financial covenant test from December to March and is in discussions with the banks to put a new facility in place."Acknowledging the banks' understandable reluctance to take outright control of Premier via a debt/equity swap, it is our belief that they are now in a position to set the agenda," said UBS analyst Alan Erskine. "The banks overriding priority must be to get their money back as quickly as possible and whilst this requires Premier to make profits/ generate cash, we are concerned that the interests of equity shareholders are now subordinate."The broker cuts its price target from 21p to just 2p, saying that there is a "significant risk that the equity may be worthless."However, despite the negative comments, shares were trading 11.72% higher at 7.2p by 10:25.BC