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Bisto kids bake an exceedingly complex deal

Issuer: RHM Finance Amount: £650 million Type of issue: whole-business securitization Date of issue: February 28 Arranger: JP Morgan


Whole-business or operating-company securitization may be the latest fad in structured finance, but there is nothing new about the concept. Since the mid-1990s, specialist buy-out firms such as Nomura's Principal Finance Group have financed their purchases of pub estates and train rolling-stock companies by pledging all the cashflows from these businesses to bondholders.

What is new about the latest such deal is the type of business being securitized. At the end of February, JP Morgan closed a deal that partly refinanced Doughty Hanson's acquisition of food company Ranks Hovis McDougall (RHM).

The private-equity firm bought RHM from UK conglomerate Tomkins last July for £1.1 billion.

RHM Finance issued £650 million-worth of bonds rated between triple B and single B. The notes were secured by cashflows from a business comprising several of the UK's best known brands. They include such old favourites as Hovis bread and Bisto gravy powder.

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