GREENE KING, the Suffolk-based brewer and pub operator, has issued £600 million of bonds against 904 of its 2,100 pubs.
Although securitisations have become commonplace in the pub industry, Greene King’s bond issue is unusual in that it was taken out against managed and tenanted pubs.
The bond issue is the second stage of a refinancing of the £1.05 billion bridging loan provided by Lloyds TSB in July last year when the pub company bought 432 neighbourhood pubs from the Laurel Pub Company for £654 million.
The Laurel deal was financed without recourse to shareholders and the group said it expected to refinance the loan with longer-term facilities. In December it took the first step when it took out a syndicated loan of £450 million.
The company has issued three classes of secured notes that will mature between 2031 and 2034. The notes have been given ratings ranging from single-A to triple-B by Fitch and Standard & Poor’s, the rating agencies. Bondholders will be repaid from the cashflow generated by the 904 pubs, which are all freehold or long leasehold.
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Paul Crawford, of Fitch, said: “This is the first pub securitisation to be rated on the basis of being a hybrid managed and tenanted estate.”
Michael Shallow, Greene King’s finance director, said that the inclusion of 305 managed pubs as well as 599 tenanted houses would provide flexibility to convert weaker managed pubs to tenancies.
Geof Collyer, a Deutsche Bank analyst, said that securitising a part of the business would also give the financial flexibility to take advantage of acquisition opportunities still available in the sector.
Shares in Greene King fell 5p to £13.10 yesterday.