(Bloomberg) -- Stakeholders in the UK’s biggest pub operator are gearing up for talks on how to address its more than £2 billion ($2.5 billion) in debt coming due next year. 

Stonegate Pub Co., its owner TDR Capital and its senior and junior creditors will discuss how to tackle the upcoming debt maturities, said people familiar with the matter, who spoke to Bloomberg on the condition of anonymity. 

The company and its sponsor have brought in bankers at Evercore Inc and lawyers at Kirkland & Ellis LLP to advise on their options, said the people. Stonegate could slash a part of its debt and then address the remainder, creditors say. 

“We have been very clear that we continue to work towards achieving our long-term balance sheet goals, with the successful refinancing of a portion of our estate in December marking a significant strategic step towards this,” a Stonegate representative said in an emailed comment to Bloomberg, referring to efforts last year to lighten its debt load. 

A spokesperson for TDR declined to comment. Evercore and Kirkland & Ellis didn’t immediately respond to requests for comment. 

The pub operator, which has in its portfolio 4,500 establishments across the UK, has had to navigate a series of challenges over the last few years. The coronavirus pandemic shuttered pubs for several months, while pent-up demand following the reopening was subdued as inflation ate into consumers’ disposable incomes. Higher interest rates have meanwhile increased borrowing costs for issuers. 

Read more: Britain’s Biggest Pub Chain Seeks to Raise Debt as Sale Falters

After unsuccessfully attempting to sell a portfolio of 1,000 pubs, Stonegate last year moved them into a special purpose vehicle with Apollo Global Management Inc. providing around £630 million of new debt, Bloomberg News reported. Existing bondholders might be allowed the opportunity to invest in the new funding to Stonegate’s special purpose vehicle as a sweetener.

While bringing in new cash, the Apollo funds also increase the interest bill for Stonegate: the loan has a margin of 635 basis points over the Sonia benchmark.

The firm is sitting on over £3 billion in liabilities accumulated since its acquisition by TDR in 2010, which seized the opportunity in a period when accessing funding was relatively cheap. 

Read more: London Pubs Lean on Happy Hour to Lure Bankers to Quiet City

Now, due dates are coming into view. Stonegate has about £2.2 billion of secured bonds due in July 2025. The company also has over £100 million due in amortization payments under its Unique Pub Finance Co. securitization structure between now and September next year, according to data compiled by Bloomberg. The last tranche under Unique is due between 2031 and 2032. 

“It’s a matter of cash flow and making sure you can afford your capital structure going forward, create a cushion for your operations,” said Wolfgang Felix, founder of independent special situations firm Sarria. “Even after the Apollo transaction, there won’t be a lot of room in the financials with the current debt levels and as a creditor, you want to be confident that the future instruments are covered.” 

--With assistance from Laura Benitez.

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