September 29, 2017 / 10:55 AM / 2 months ago

Boparan bonds slump after another food safety exposé

* Chicken supplier’s bonds slump after safety violation reports

* Rumours of refinancing trade thrown into doubt

By Yoruk Bahceli

LONDON, Sept 29 (IFR) - Boparan’s notes slumped on Friday on the back of an undercover investigation that showed food safety violations at one of its processing plants.

The bonds dropped between three and five points on the open, according to Tradeweb data. By 10:30am some of the losses had been recovered, leaving bids two to three points lower on the day.

Its £330m 5.5% 2021 notes were the worst performers, touching 93.33 before a bounce back to 95.5. They closed Thursday around 98.23.

The slump follows an investigation by British news sources The Guardian and ITV News showing significant violations of food safety practices at a portioning and packing plant run by 2 Sisters Food Group, a Boparan subsidiary.

“It will probably be worse than previous ones,” said an investor involved with the name in the past, citing the company’s actions during quality assurance checks.

The Guardian report said that quality assurance inspectors had been prevented from carrying out their duties at times.

”I wouldn’t be surprised if there’s worse to come, the investor said.

Controversy is nothing new for the company. In 2014, its bonds were hit after another exposé of hygiene failings at its facilities. They were bid in the 80s and low 90s until this year, when they picked up.

The news comes as Boparan was expected to revisit the high-yield market for a refinancing trade. Over the summer, one fund manager pointed to Boparan as one of several British retail-related names that would seek a window of opportunity before Brexit uncertainty potentially impacts the market.

The sterling 2021s and a €300m 4.375% 2021 note have been callable since July 15, while a £250m 5.25% 2019 has been callable since July last year.

“We have not been given the time or the detailed evidence to conduct any thorough investigations to establish the facts, which makes a fulsome response very difficult,” 2 Sisters said in a statement.

“What we can confirm is that hygiene and food safety will always be the number one priority within the business, and they remain at its very core.”

Boparan itself spelt out these risks in its bond issues. In the offering memorandum for the notes, it lists reputational damage over food safety in the risk factors, explaining that “food safety and the perception by our customers and the general public that our products are safe are essential to our image and business.” (Reporting by Yoruk Bahceli, editing by Helen Bartholomew, Julian Baker)

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