Stonegate to launch high-yield bond to finance Ei takeover

Stonegate is set to raise money via a high-yield debt issue in the coming weeks to help to finance the purchase of Ei, Reuters reports.

The £1.3bn Ei takeover - £2.97bn including debt - turned Stonegate into Britain’s largest pub owner and was completed just before the covid-19 crisis shut down the hospitality industry.

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 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, 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.

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.