Long-term debt refinancing and Covid-19 update
The Restaurant Group plc
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE UK VERSION OF THE MARKET ABUSE REGULATION (REGULATION (EU) No 596/2014). UPON THE PUBLICATION OF THIS ANNOUNCEMENT THE INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
Long-term debt refinancing, Covid-19 update and notice of results
Summary:
· £500m of new long-term debt facilities
o £380 million Term Loan Facility to 2026; and
o £120 million Super Senior Revolving Credit Facility to 2025
· Covenants - no leverage tests until June 2022
· FY 2020 year-end (27 December 2020) net debt (pre-IFRS16) of c.£340m, in line with our expectations
· c.£5.5m cash burn per four week period during ongoing national lockdown, with a c.£40m working capital outflow post year-end due to unwind of supplier creditor positions
· Strong recent trading for delivery and takeaway across c.200 sites in Wagamama and Leisure businesses
· Accelerated reopening plan for dine-in trading, once the current restrictions for hospitality businesses end, with all viable sites being reopened within two weeks
£500m of new debt facilities
The Restaurant Group plc ("Group" or "TRG") is pleased to announce it has successfully signed commitments in relation to £500 million of new debt facilities (the "New Facilities"), which comprises a £380 million Term Loan Facility (the "Term Loan"), and a £120 million Super Senior Revolving Credit Facility (the "RCF").
The New Facilities provide the Group with enhanced liquidity and long-term financing with the maturities of the Term Loan and the RCF being in 2026 and 2025, respectively.
The Term Loan and, as required, an initial simultaneous drawing of the RCF will be used to repay and refinance in full all of TRG's existing debt facilities namely the TRG Plc RCF, the CLBILS Facility, the Wagamama Notes and the Wagamama RCF (the "Existing Facilities") which are all due to reach maturity by July 2022.
Following the utilisation of the New Facilities, and the repayment of the Existing Facilities, the Group's financing arrangements will be simplified, as the Group will be consolidated into one finance group at the TRG level which will provide a more efficient funding structure to support the Group's strategic initiatives.
The New Facilities covenant package provides significant covenant headroom for an extended period . In particular, the Group shall be subject only to a minimum liquidity covenant set at £40m (versus £50m under the existing TRG Plc RCF) until 30 June 2022 with net leverage-based testing then resuming under the RCF. There shall be no net leverage-based testing under the Term Loan until the period ending 31 December 2022 at which point the Group's net leverage covenant (as measured on a pre-IFRS 16 basis) shall be set at 5.0x before decreasing every six months to 4.0x by the period ending 31 December 2023 and thereafter.
Both the Term Loan and the RCF are subject to a margin ratchet which allows the Group's cost of debt to decrease according to prevailing net leverage (defined as pre IFRS 16 net debt/EBITDA). For illustrative purposes the initial weighted average cost of debt is expected to be approximately 7.0%, which would fall to approximately 6.0% were net leverage to go below 2.0x (defined as pre-IFRS 16 net debt/EBITDA). In addition, whilst the Term Loan contains no contractual amortisation repayments, it provides flexibility to allow the Group to prepay the facility if desirable, with a significant proportion of the facility able to be prepaid without penalty in the 18 months following the initial drawdown. The commitments to provide the Term Loan and the RCF are subject to agreement of final documentation with the lenders.
Covid-19 update
The Group released a "Further Covid-19 update" announcement on 18 December 2020, which detailed a cash burn rate of c. £5.5m per four week period of national lockdown. The cash burn rate is expected to stay at this level until the end of the current restrictions for hospitality businesses, which as per government guidance on 22 February are due to end no earlier than 17 May 2021.
Net debt (on a pre IFRS16 basis) as at the year-end (27 December 2020) is expected to be approximately £340m, in line with our expectations. Additionally the working capital outflow post year-end as a consequence of the January national lockdown totalled £40m due to the unwind of supplier creditor positions.
The Group currently has approximately 200 sites trading for delivery and takeaway across its Wagamama and Leisure businesses. The trading performance of those sites in the current financial year (FY 2021) has been very encouraging with average standalone delivery and takeaway sales in Wagamama and Leisure at approximately 2.5x and 5.0x pre-Covid-19 levels respectively during the current national lockdown1. With this strong operating platform in place, the Group has good capability to deliver an accelerated reopening plan for dine-in trading, once the current restrictions for hospitality businesses end, with all viable sites being reopened within two weeks.
1 Average standalone delivery and takeaway sales for the latest three weeks ended 21st February 2021
Notice of Results
The Group will announce its full year results for the 52 weeks to 27 December 2020 on 10 March 2021.
Enquiries:
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The Restaurant Group plc Andy Hornby, Chief Executive Officer Kirk Davis, Chief Financial Officer Umer Usman, Investor Relations |
Tel: +44(0) 203 117 5001 |
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MHP Communications (Financial PR adviser)
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Tel: +44(0) 203 128 8789
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Notes:
1. As at 27th December 2020, The Restaurant Group plc operated approximately 400 restaurants and pub restaurants throughout the UK. Its principal trading brands are Wagamama, Frankie & Benny's and Brunning & Price. It also operates a multi-brand Concessions business which trades principally in UK airports. In addition the Wagamama business has a 20% stake in a JV operating six Wagamama restaurants in the US and over 50 franchise restaurants operating across a number of territories.
2. Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect the Group's current expectations concerning future events and actual results may differ materially from current expectations or historical results.
3. This announcement has been determined to contain inside information. The person responsible for the release of this announcement on behalf of TRG is Kirk Davis (CFO). LEI: 213800V4LJ2FXMQKKA46.
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