Stonegate Group secures refinancing deal from TDR Capital

Stonegate Group, the UK’s largest pub company, has secured a refinancing deal from TDR Capital LLP, a UK-based private equity firm.

Stonegate Group has agreed to refinance £3.0bn of debt, following strong demand from investors.
As part of the deal, funds managed by TDR Capital will make a £250m shareholder contribution.

The refinancing comprises £2.1bn new senior secured notes and £0.2bn second lien facilities which, together with cash from balance sheet, will be used to redeem all of the £2.2bn outstanding senior secured notes, £0.4bn of second lien facilities and £0.1bn Class A Unique notes and pay certain costs, fees and expenses in connection with the transaction.

This refinancing will extend the group’s maturities on the revolving credit facility and the senior secured notes to January 2029 and July 2029 respectively, and reduce leverage from 8.2x to 6.5x RR EBITDA today.

Following the refinancing and the resulting lower debt service burden, Stonegate will have close to £300m more to invest back into the business over the next three years. As such, the additional investment by funds managed by TDR Capital will be used to support Stonegate’s continued growth.

TDR Capital acquired 333 pubs from Mitchells and Butlers plc in 2010 to create the Stonegate Pub Company, supporting the business to grow its portfolio. In July 2019, Stonegate launched a cash offer for Ei Group and, upon completion in March 2020, created the UK’s largest pub company with over 4,500 sites.

Since then, TDR Capital has worked with Stonegate to continue its expansion. This has included an investment of £500m of capex since 2020.

Recent trading has been strong with group profit up 7.7% in the first half of FY24. The Lease and Tenanted (L&T) and the operator-led managed estate Craft Union businesses also saw profits increase by 8.9% and 21.5% respectively. Craft Union in particular has performed well, with profits increasing to £77m up from £22m since the acquisition of Ei Group.

David McDowall, CEO of Stonegate Group, said: “We have always said we would achieve the right outcome on our refinancing requirements, and I am delighted we can now move forward with confidence and certainty, having achieved our balance sheet goals. The new agreement enables us to really focus on driving performance across all our divisions, and delivering on our strategy which is now having a material impact on our overall profitability.

“I am pleased that we now have certainty to truly focus on what we do best, which is bringing people together through our passion for great pubs, bars and venues. I would like to thank our lenders for the positive way we have reached these agreements and TDR for their continued support. Most importantly, I would like to thank Stonegate colleagues for their continued dedication, commitment and passion which has seen us navigate a difficult few years. We are now in a really strong position to deliver on our longer-term objectives.”

Tom Mitchell, managing partner, and Hassan ElGazzar, partner, at TDR Capital, added: “This successful refinancing and new equity investment marks an important moment for Stonegate as it looks to build on its position as the leading pub company in the country. Now with 4,500 sites, we will keep working with David and the whole Stonegate team, including franchise partners and tenants, to drive further growth and deliver the best value for customers.”