U.K. Pub Giant Readies Debt Sale Ahead of Drinkers’ Return
U.K. Pub Giant Readies Debt Sale Ahead of Drinkers’ Return
(Bloomberg) -- Stonegate Pub Co., whose bars including the Walkabout and Slug & Lettuce chains, is preparing to tap investors for M&A financing as the U.K. gets ready to reopen its pubs.
The banks that provided 1.8 billion pounds ($2.3 billion) of debt to support Stonegate’s acquisition of EI Group Ltd are set to place a portion of the deal with a small group of investors before broadly syndicating the remainder in late July, according to people familiar with the matter.
The lenders had been forced to wait to sell their exposure after the coronavirus pandemic brought the leveraged debt market to a halt as well as forcing pubs to shut their doors. As governments and central banks act to buoy their economies and credit markets improve, banks are now starting to shift large deals off their balance sheets.
Barclays Plc, Goldman Sachs Group Inc., Nomura Holdings Inc., Deutsche Bank AG, Lloyds Bank Plc and Cooperatieve Rabobank UA underwrote the bond and loan facilities nearly a year ago when Stonegate agreed to buy EI Group to become the biggest U.K. pub group with more than 4,700 establishments. The acquisition closed in the first quarter.
Representatives for EI Group and Stonegate’s owner TDR Capital declined to comment.
Final Size
After several weeks of discussions with funds, the arrangers of the Stonegate deal now plan to place about 500 million pounds of debt as a private bond, the people familiar said, declining to be identified because the discussions are private. The transaction may happen this week or next, when the final size and terms will be set, they said.
As pubs reopen on July 4 and trading picks up, the underwriters will look to sell down the rest of the debt by issuing a public bond and raising a term loan, the people familiar said. At that point, the private bond will shift into a public debt instrument that can be bought and sold by investors beyond the original club, one of them added.
Pricing on the private bond is talked in the low-8% area, with a discount to par in the 95-96 range. The five-year instrument is thought to have non-call protection of two years, the people said.
A 400 million-pound second-lien loan and a 325 million pound PIK facility have already been placed to support the acquisition. Stonegate’s parent TDR Capital has injected 50 million pounds of equity, and the banks have increased the revolver by 50 million pounds, one of the people said.
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