Mitchells and Butlers, the pub and restaurant group, has announced the terms of a £1.1bn bond issue, launched as part of its ongoing plans to return cash to shareholders, and also to maintain optimum balance sheet efficiency. M&B will market the bond through The Royal Bank of Scotland and Citigroup, in order to increase the level of debt in its securitised estate by £655m, from £1.8bn to £2.46bn. The average cash interest cost on the new bonds will be 5.4%. Subject to market conditions, the group expects to complete the bond issue on 15 September. Following the bond issue, M&B said it will enter into a medium-term unsecured loan facility, to replace the short-term bridge financing put in place to acquire 239 pub-restaurants from Whitbread. The company is then proposing to pay shareholders a special dividend of £1 a share, amounting to about £486m. Following the completion of this refinancing, the company will invest a further £50m in its pension fund, on top of the £10m committed for 2007, to cover the £70m deficit reported as of 15 April 2006. Karim Naffah, finance director at Mitchells & Butlers, said: “We have had an excellent response to our bond issue. The strong operational performance of our pub estate and the resulting property appreciation have enabled us to raise additional debt on attractive terms. “This allows us to make a further substantial cash return to shareholders, in addition to the acquisition of 239 pub restaurants successfully concluded earlier this year.” The group reported last month that the average value of its securitised pubs is now £2.8m, up 40% on the 2003 figure. M&B will provide a trading update on 26 September, but said it expects full year results to be in line with the board’s expectations.