12th Jun 2020 09:41
(Alliance News) - Mitchells & Butlers PLC said Friday it has made new agreements with its creditors which give the company more liquidity and financial flexibility to handle the Covid-19 lockdown.
Shares in the Birmingham-headquartered company were up 9.0% at 219.00 pence in morning trading.
The managed restaurants and pubs operator, which owns Toby Carvery and Harvester, has cancelled all discretionary expenditure and furloughed more than 99% of its workforce amid the UK virus lockdown which forced closures.
Mitchells & Butlers has been in talks with creditors and obtained committed unsecured liquidity facilities from its "main relationship banks" amounting to GBP250 million through to the end of 2021.
This GBP250 million includes an extension to the term of the company's existing GBP150 million facilities as well as provision of another GBP100 million.
These facilities will be on a new covenant structure to reflect Mitchells & Butlers's "revised trading profile" through its recovery after re-opening and are supported by a negative pledge on the company's unsecured assets.
The GBP100 million is structured under the UK government-backed coronavirus large business interruption scheme.
At present, Mitchells & Butlers has cash balances totalling GBP130 million, having already fully drawn down is existing facilities of GBP150 million.
The company's loss before interest, tax, depreciation, and amortisation has stabilised at around GBP15 million in a four-week period during the pub closures, including rent.
Cash burn before debt services is more than this, as Mitchells & Butlers pays down supplier balances - though this is set to reverse once it re-opens - at between GBP30 million and GBP35 million per four-week period.
To prevent technical breaches under the company's financing arrangements, Mitchells & Butlers has agreed amendments and waivers with controlling creditor Ambac Assurance UK Ltd.
These arrangements include a further waiver of an amendment to its 30-day suspension of business provision. There is a waiver of a six-month look-back debt service coverage ratio test until July 2021, as well as a waiver of the 12-month look-back debt service coverage ratio test until September 2021.
On top of which, the requirement to appoint a financial adviser where the debt service coverage ratio fell bellow the required level has been waived. Mitchells & Butlers also obtained a waiver to facilitate drawings of up to GBP100 million under its secured financing liquidity facility, so long as this is repaid in full by the end of march 2021.
As agreed is "a reduction in the minimum amount required to be spent on capex during the remainder of this, and the next, financial years arising from the business having been temporarily suspended".
As part of these agreements, Mitchells & Butlers has committed to not pay an external dividend, conduct share buybacks, or repurchase bond debt until the end of its financial year ending September 2021 at the earliest.
"The financial arrangements we are announcing today put us in good shape to address the challenge ahead based on what we believe to be a conservative downside scenario in which the reopening of any of our sites is delayed until October and sales then build back to reach full previous year trade levels over the period to July 2021. Our current expectation is for the commencement of reopening of sites from early July this year," said Mitchells & Butlers.
By Anna Farley; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
Mitchells & Butlers