(Bloomberg) -- The owner of the UK’s biggest pub operator is nearing an agreement with its creditors to address more than £3 billion ($3.9 billion) in debt.
Stonegate Pubs is set to receive around £200 million from owner TDR Capital LLP as part of a deal that would reduce its debt pile, said people familiar with the matter. An agreement could be reached as soon as this week, according to the people. Representatives for Stonegate and TDR declined to comment when contacted by Bloomberg News.
The company — whose pubs include Slug & Lettuce, Walkabout, Be At One — along with its sponsor and creditors have been in talks for months over how to tackle Stonegate’s capital structure amid looming maturities.
The pub operator has navigated through a series of challenges from closures during the coronavirus pandemic to subdued demand as a spike in inflation ate into consumers’ disposable incomes. Higher interest rates have, meanwhile, increased borrowing costs for issuers such as Stonegate, which has 4,500 establishments across the UK in its portfolio.
Stonegate has £2.2 billion of first lien bonds coming due in July 2025. Under the plan being discussed, those would be refinanced, with a longer maturity and a higher coupon, people familiar with the matter said. Funds holding those notes include Arini, King Street Capital Management LP and Sculptor Capital Management Inc., as reported earlier.
Those notes are currently quoted at 99 pence on the sterling, compared with less than 92 pence in late 2023, according to Bloomberg pricing.
Meanwhile, £400 million of second lien loans due in 2028 would be partially repaid, with holders including Canyon Partners LLC exchanging the rest for new debt, said the people.
Finally, one of Stonegate’s holding companies had received a payment-in-kind facility from investors led by AlbaCore Capital LLP in 2019, and the debt has ballooned to more than £500 million over the years, according to Bloomberg calculations. The facility would be rolled into an equity-like instrument, said some of the people. A representative for AlbaCore declined to comment.
Stonegate released results for the first half of its fiscal year 2023-2024 to investors in June. The company reported that revenue rose by 1.3% to £916 million for the period, while adjusted Ebitda also grew by 7.7% to £196 million, according to an emailed statement seen by Bloomberg News.
--With assistance from Sabah Meddings, Silas Brown and Luca Casiraghi.
(Adds first lien bond pricing in the sixth paragraph.)
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