Apollo to Save Britain’s Biggest Pub Chain with £630m Bailout

Apollo Global Management Inc. is nearing a deal to provide as much as £630m of debt to Stonegate Pub Co., people with knowledge of the matter said, allowing Britain’s biggest pub chain to pay down existing borrowings before a crucial deadline. 

Stonegate — which is owned by London-based private equity firm TDR Capital — is splitting off a group of about 1,000 pubs into a special purpose vehicle to pay down the debt that fueled its rapid expansion over the last 10 years.

The fresh debt is set to be priced at about 650 basis points over the sterling overnight index average (known as Sonia), some of the people said. The ultimate proceeds will be between £600m and £610m after fees, they said. 

A representative for Stonegate declined to comment. Apollo did not immediately respond to a request for comment.

Stonegate needs to raise the cash to pay down existing debt, built up since it was created in 2010. When the pub group bought Ei Group — formerly Enterprise Inns — in 2019, it said it would eventually sell a package of pubs. However, a sales process proved unsuccessful and Stonegate opted to raise debt instead.

Over the summer, ratings firm Moody’s Investors Service 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.

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While the deal with Apollo will layer more debt on to the group, existing bondholders might be allowed the opportunity to invest in the new funding to Stonegate’s special purpose vehicle as a sweetener, said two of the people. 

Stonegate’s bonds are currently quoted at a discount of about 5% versus their face value, according to pricing compiled by Bloomberg. 

Source: BNN Bloomberg

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