Apollo Global Management is nearing a deal to provide as much as £630m of debt to Stonegate Group, allowing the pub chain to pay down existing borrowings before a crucial deadline.
Bloomberg reports that the fresh debt is set to be priced at about 650 basis points over the sterling overnight index average (known as Sonia), with the ultimate proceeds to be between £600m and £610m after fees, according to sources close to the matter.
Stonegate, owned by TDR Capital, is splitting off a group of c1,000 pubs into a special purpose vehicle that fuelled its rapid expansion over the last 10 years.
When the pub group bought Ei Group, formerly Enterprise Inns, in 2019, it said it would eventually sell a package of pubs. However, Stonegate opted to raise debt instead following an unsuccessful sales process.
Earlier this year, ratings firm Moody’s revised the outlook on Stonegate to negative, with more than £2bn of bond maturities due in July 2025.
Moody’s expects the company’s net debt to be more than eight times as large as its profits at the end of this year.
While the deal with Apollo will layer more debt onto the group, Bloomberg’s sources said the existing bondholders may be allowed the opportunity to invest in the new funding to Stonegate’s special purpose vehicle as a sweetener.
Stonegate’s bonds are currently quoted at a discount of c5% vs their face value, according to pricing compiled by Bloomberg.
