Enterprise Inns has announced an offering of approximately £100m of senior, unsecured Guaranteed Convertible Bonds due 2020, which it said would provide it with low cost, unsecured long-term funding, reduce its overall cost of borrowing, provide it with increased flexibility and enhance prospects for growth.
The company said it would also allow it to reduce the current level of pub disposals, focus on the disposal of under-performing assets and maximising returns for shareholders by the reinvestment of disposal proceeds into trade generating capital expenditure schemes designed to drive like-for-like growth across the business.
As a result of the offering, Enterprise will not need to draw down the £70m Tranche A of the Forward Start Facility commencing December 2013, which carries an interest cost of 5.0% - 6.5% over LIBOR, thereby reducing the overall bank facility to £150m, amortising to £75m on its maturity in June 2016.
Chief executive Ted Tuppen said: “During the past four years, we have reduced the overall level of debt by over £1 billion, partly funded by cash generated from operations and the balance through disposals. As the quality of our pubs has improved, we have also moved towards delivering like-for-like income growth across the whole estate. The Offering will bring to an end the use of disposal proceeds for debt reduction and allow us to drive real growth in the business.”
The Bonds will be issued by Enterprise Funding Limited, a wholly-owned subsidiary of Enterprise incorporated in Jersey (the “Issuer”), and will be guaranteed by ETI, as is customary for transactions of this nature.
The Bonds will have a maturity of seven years, will be issued and redeemed at par and are expected to carry a coupon of between 3.50% and 4.00% per annum payable quarterly in arrear. The Bonds will be convertible into ordinary shares of Enterprise Inns.
Concurrent with the issuance of the Bonds, a bookbuilding for an accelerated secondary equity placing of Shares (the “Concurrent Equity Placing”) will be carried out by the Joint Bookrunners. The Concurrent Equity Placing is being undertaken in order to co-ordinate potential selling interest in the Shares resulting from the issuance of the Bonds. The final price for the bookbuilding of the Shares will be used as the reference share price for the Bonds (the “Reference Share Price”). The initial conversion price is expected to be set at a premium of between 30% and 35% above the Reference Share Price.
The final terms of the Bonds are expected to be announced today and settlement is expected to take place on or about 10 September 2013.
It is intended that an application will be made for the Bonds to be listed on a recognised stock exchange after the Closing Date but prior to the first coupon payment of the Bonds (10 December 2013).
Barclays Bank PLC and Deutsche Bank AG, London Branch are acting as Joint Bookrunners (together, the “Joint Bookrunners”) in respect of the Offering.
