The restaurant company that owns the Café Rouge and Strada chains has completed a bank refinancing that removes the risk that it might breach its covenants and gives it the capacity to continue expanding.
Tragus Group, which is backed by Blackstone, is to press ahead with plans to open as many as 15 new restaurants in the next year after its banking syndicate, led by Barclays, agreed to a refinancing deal that cuts its net debt from £240 million to £219 million.
As part of the deal, Tragus will repay the banks £15 million of the £40 million of cash on its balance sheet, while Blackstone has agreed to convert £14 million of “second lien” debt into equity. The rate of interest on its debt, which matures in 2017, will increase by 175 basis points and Tragus is thought to be paying a refinancing fee of just over £1 million.
Graham Turner, the Tragus chief executive, said the refinancing was in recognition that market conditions had changed considerably since the debt facility had been put in place. He said that the headroom on its covenants had got “tighter and tighter” during the economic downturn, adding: “The world is a very different place and it was clear the covenants needed adjusting.”
Mr Turner said that, with a solid financial platform, the group could continue to pursue its expansion plans. It is on target to open 15 eateries in the year to the end of May and expects to open at least another ten next year and for the foreseeable future.
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The group, which also owns the Bella Italia chain, has 295 restaurants. In addition to investing in new sites, it is in the middle of a revamp of its Strada chain and has started testing a more contemporary look for Café Rouge.
Last year, Tragus suffered a 9 per cent fall in underlying earnings to £41.2 million after the third straight year of declining like-for-like sales, although new openings pushed total sales 2 per cent higher to £277.4 million.
Mr Turner characterised current trading as “up and down” as consumers focused more of their spending on big events like Christmas and Easter and the school holidays. He said that while February had been difficult, March had started well, adding: “It’s very difficult to predict.”