Mitchells and Butlers this morning announced plans to issue a £1.1bn bond, as part of its ongoing plans to return cash to shareholders and maintain an efficient balance sheet.
M&B will market the bond issue with 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 proposed £1.1bn issue consists of £655m of incremental financing and a further £450m, which will be used to refinance existing Floating Rate Notes. Subject to market conditions, the group expects to complete the bond issue in September.
Following the bond issue, M&B will enter into a medium-term unsecured loan facility, to replace the short-term bridge financing put in place to acquire the 239 pub restaurant sites from Whitbread.
The company is then proposing to pay shareholders a special dividend of £1 a share, which will be accompanied by a proportionate share consolidation. M&B will cancel its proposed second—half share buyback as a consequence, resulting in a total return of some £519m to shareholders.
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.
The group also repored that the average value of its securitised pubs is now £2.8m, up 40% on the 2003 figure.
Tim Clarke, chief executive, said: “Mitchells and Butlers’ pub estate is now worth over £5.5bn. The substantial appreciation of our asset base over the past three years demonstrates the value that has been added to our high quality estate through the successful implementation of our operational strategy. We continue to build on our leadership in the fast-growing pub food market.
“Based on its strong trading performance and consequent asset value, the business has created the capacity to take on more debt. This latest return also reflects our confidence in the future prospects of the company and the significant potential of the pubs recently acquired form Whitbread.”
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.
