Peppa Pig owner Entertainment One sees shares rally 11% after plummeting by nearly a third on pricey £285m debt deal 

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Entertainment One rebounded by 11 per cent today after the Peppa Pig owner confirmed that it continues to trade in line with full year expectations, as it responded to a recent slide in its shares.

In late morning trade, the media group's stock was up 15.8p to 156.7p having been under pressure since the company announced a refinancing deal that will increase its interest payments.

The stock also benefited from an upgrade in rating today by broker Peel Hunt to buy from reduce, with an unchanged target price of 200p.

Porcine portfolio: Peppa Pig owner Entertainment One has seen shares fall by nearly a third

The Peppa Pig firm has seen its shares fall by nearly a third since it revealed a refinancing deal that sets its debt bill at £285million with higher interest rates.

The TV distribution and production company announced on Friday it was taking the new debt at a rate of 6.875 per cent over seven years.

Interest on its previous debt facility was 4.3 per cent. Shares dropped 15 per cent on Monday and a further 20 per cent yesterday, wiping around £300million from its market value.

It was the eighth day of trading in a row that the company’s shares had fallen, having come down by 35.2 per cent since November 27.

Entertainment One increased its stake in Peppa Pig creators Astley Baker Davies to 85 per cent in October in a deal worth £141million, and in January it acquired a majority stake in the Mark Gordon Company, which makes US medical drama Grey’s Anatomy. 

In the six months to September 30 its finance costs stood at £11.3million, up from £6.5million for the same period in 2014.

Chief executive Darren Throop had said in the Entertainment One’s interim trading statement that it planned to double in size by 2020.

In response to the refinancing deal, analysts at N+1 Singer said earnings per share could fall by 8.6 per cent next year, and in 2018.

Malcolm Morgan, analyst at Peel Hunt, said the refinancing left the firm with a ‘significantly higher debt cost’.

Morgan noted that until recently the company had promised it would pay off its most expensive debt. Now it has committed to borrowing £285million for another seven years at a cost of nearly 7 per cent.

He said: ‘The cost of this is significantly above the debt it replaces.’

Shares closed 35.5p down at 140.9p yesterday.