Company News

Stonegate sells 1.2 billion pounds of bonds to finance deal with Ei Group

July 24 (Reuters) - Slug and Lettuce pub owner Stonegate sold 1.2 billion pounds ($1.53 billion) of bonds on Friday to finance its acquisition of rival Ei Group, the company said on Friday.

The financing package consisted of five-year sterling and euro tranches worth 950 million pounds and 300 million euros ($349.11 million) respectively, according to a transaction note shared by Stonegate with Reuters.

Reuters reported late in June that Stonegate was set to raise money via a high-yield debt issue to help finance the purchase of Ei.

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

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, sources said in June.

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.

England allowed pubs, hair salons and restaurants to open earlier this month, as it looked to resume normal life.

The United Kingdom has had over 327,000 cases of coronavirus infections and over 45,000 deaths from the outbreak as of Friday. ($1 = 0.7820 pounds) ($1 = 0.8593 euros) (Reporting by Kanishka Singh in Bengaluru; editing by Jonathan Oatis)