Shares in Hovis firm fall sharply

See Premier Foods share price

Shares in Premier Foods, the company behind Hovis and Mr Kipling cakes, have fallen sharply on market rumours that it is in financial difficulties.

Traders said that there was speculation that the company may be about to breach the conditions on some of its loans.

But Premier issued a statement to the stock exchange saying that it expected to be able to meet all its financial covenants this year.

Premier Foods shares closed down 12.9% or 4.5 pence at 30.5p.

The shares have been falling since Monday when Premier announced that it was looking for ways to reduce its £1.8bn of debt.

Shares recovered somewhat after the statement was released, having earlier been down as much as 50%.

Companies with a lot of debt have been under pressure because the credit crunch means that many of them are having to pay more interest.

Premier Foods shares were also hit in February by rumours that it would have to issue more shares.

In its statement to the stock exchange it said: "In current market conditions the Board is not pursuing any current plans to issue equity or equity linked products."