United Biscuits, the maker of McVitie's, has tried to buy Mr Kipling, the cake brand owned by the debt-laden Premier Foods, it was confirmed yesterday.

Premier, the owner of Hovis Bread, Campbell's soup and a host of other household names, rejected the tentative offer out of hand. “I'm not in the business of selling things off dirt cheap,” Robert Schofield, Premier's chief executive, said.

Premier also said that it would take a £4.9 million penalty charge to move a key test of its banking covenants from December 31 to March 31, a delay that will give the company time to restructure financially after it failed to sell two of its own-label businesses. Premier has suffered from a lack of liquidity and is negotiating for more flexibility in its covenants.

The company has been anxious to reassure investors that it is not in danger of breaching the lending rules on its £1.8billion of debt, which dwarfs its £240 million market value. Fears about the scale of Premier's debt and the banking covenants have eroded nearly 75 per cent of its market value in three months.

Yesterday, it cancelled its £18.9million dividend payout to reduce its debt burden. Shares in Premier fell by 2p, or 8 per cent, to 28p. Speculation about Premier's debt position has prompted up to 20 “expressions of interest” in parts of the business, Mr Schofield said. “Every man and his dog has rung me up to tell me he was interested in some part of my business. Nobody has offered anything that values them correctly,” he said.

Premier tried to dispose of RF Brookes, a supplier of chilled foods to Marks & Spencer, as well as Avana Bakeries, but failed to find a buyer willing to meet the asking price or with the available financing.

Mr Schofield cited October's financial turmoil for the failure to dispose of the divisions. Of the companies that had expressed interest in parts of Premier, only United Biscuits and one other large food company, which Premier declined to name, had the financial capacity to do the deal, he said.

Goldman Sachs, which is advising Premier Foods on its debt, counselled the company to push back the covenant test to put an end to market speculation, according to Mr Schofield.

Premier has consistently stated that it is not on course to breach its covenant, that it would have passed the covenant test and that it simply needed time to financially restructure. Mr Schofield said: “The market concern over any company with high debt has gone up and we certainly have high debt. We have to get on a financial footing that can stand the rigours of the market.”

Mr Schofield declined to give any details on the restructuring, but ruled out selling the debt.

Rob Mann, an analyst at Collins Stewart, said: “There is no quick fix solution: asset sales are undesirable and equity issuance at current levels still more so. Passing the dividend, convincing lenders of the robust trading outlook and the flow through of synergies in 2009 and negotiating more relaxed near-term covenants - this is the only way out.”

The £1.8 billion debt was acquired in 2006 and 2007 when the company bought RHM, the maker of Hovis bread, as well as Campbell's soups. The company said it was trading well, despite the tough economic climate, and that it was beginning to reap the rewards from its new Hovis television advertising campaign.

Sales of Hovis have risen by 11 per cent in the past four months, and by 14 per cent for the year.

Group sales were up 9 per cent for the four months to October 31, in line with expectations that trading would be stronger towards the second half of the year.

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