(Bloomberg) -- Stonegate Pubs, the UK’s biggest pub operator, is starting a large debt refinancing with a bond sale and a £250 million cash injection from its private equity owner TDR Capital.
The company is selling the equivalent of around £2.1 billion ($2.7 billion) in bonds, which will be split between sterling fixed-rate and euro floating-rate senior secured notes, according to a person familiar with the matter. Only about £670 million will be marketed by banks led by Barclays Plc. The rest is to be bought by existing investors, the person said.
The proceeds, along with other funding, will be used to refinance the existing debt of the pub chain, which has struggled after the pandemic caused nationwide lockdowns and the UK’s cost-of-living crisis led drinkers to stay at home. The company will also tap into its existing cash and a £156 million second lien debt facility.
The company, whose pubs include Slug & Lettuce, Walkabout and Be At One, and its owner have been in talks with creditors for months over how to extend upcoming maturities. Stonegate has £2.2 billion of first lien bonds coming due in July 2025.
Under terms of the arrangement, it will repay first lien notes, about £400 million of second lien loans due in 2028, Class A notes from its Unique Pub Finance Co. securitization structure, and £150 million that was drawn under a revolving credit facility, the person said, asking not to be identified because the deal isn’t public.
The new deal will increase Stonegate’s interest bill on its first lien debt. The sterling notes have a coupon of 10.75%, compared with 8.25% on similar bonds in the past. Meanwhile, its second lien and bank debt will shrink in size.
Separately, Stonegate plans to issue an additional £37 million of additional 10.75% senior secured notes due 2029 as compensation to investors backing the transaction, according to documents seen by Bloomberg.
The ad hoc group of first lien bondholders include Arini Capital Management, King Street Capital Management LP and Sculptor Capital Management Inc., Bloomberg reported earlier. Beach Point Capital Management and Monarch Alternative Capital are also part of the group, according to people familiar with the matter.
Representatives for Monarch didn’t immediately respond when contacted by Bloomberg News, and Beach Point declined to comment.
--With assistance from Irene García Pérez.
(Adds context on interest bill in sixth paragraph and details on first lien bondholder group in eighth.)
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