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By Abhinav Ramnarayan
LONDON, June 23 (Reuters) - Slug & Lettuce owner Stonegate
is set to raise money via a high-yield debt issue in the coming
weeks to help to finance the purchase of larger rival Ei
, two sources familiar with the situation told Reuters.
The 1.3 billion pound Ei takeover - 2.97 billion pounds
including debt - turned Stonegate into Britain's largest pub
owner and was completed just before the COVID-19 crisis shut
down the hospitality industry.
But with pubs to reopen in Britain in July, Stonegate could
launch a high-yield bond soon to help to take out a 2.725
billion pound ($3.39 billion) bridge loan agreed in February to
finance the Ei purchase. Stonegate is
rated B3 by Moody's.
Barclays and Goldman Sachs - which also
worked on the original bridge loan - are among the banks leading
the debt plans, the sources said.
Stonegate declined to comment. Barclays and Goldman Sachs
were not immediately available for comment.
Pub operators like Stonegate have been affected by Britain's
coronavirus lockdown, but discussions with investors have shown
there is sufficient market demand for the company's debt, the
sources said.
"What investors want to see is a clear roadmap and
contingency plan for the reopening of pubs - they don't
necessarily need to wait until they are actually operational,"
one of the sources said.
"It's beautiful and sunny out there and pubs are about to
reopen - what better time to launch this bond?" he added.
Prime Minister Boris Johnson said on Tuesday pubs,
restaurants and hotels could reopen in England early next month
when the social distancing rule is relaxed to one metre.
High-yield bond markets, also known as junk bonds because of
their risk profile, were particularly hard hit in the March
financial market sell-off, with yields climbing sharply.
This prompted concerns among investors about the fate of
acquisitions agreed pre-crisis, such as Stonegate's.
But the European Central Bank's bond-buying programme and
the U.S. Federal Reserve's decision to include corporate bonds
in its purchases has since helped calm investors' nerves, as has
the gradual reopening of the European economy after weeks of
lockdown.
($1 = 0.8035 pounds)
(Reporting by Abhinav Ramnarayan, Editing by Pamela Barbaglia
and Jane Merriman)
