Securitisation and debt information
Summary
Mitchells & Butlers has two major components to its borrowings. It has c. £2.3 billion of debt in the form of tradeable, listed bonds secured over the assets and cashflow of the majority of the business. In addition, it also has an unsecured loan facility held with a number of major banks which currently has a borrowing limit of £475m.
Background
On 9 October 2003, Mitchells & Butlers announced that it was commencing the marketing of a £1.9 bn securitisation of the majority of its UK pubs and pub restaurant businesses. It also announced its intention to return £500 million to shareholders by way of a special dividend of 68 pence per share. On 6 November 2003 the Company announced that the terms of the securitisation had been finalised - and on 13 November 2003, confirmed that £1.9bn had been raised at a cash interest cost of 6.0%.
On 31 August 2006, Mitchells & Butlers announced the marketing of a £1.1bn bond issue to increase its securitised debt by £655m to £2.46bn and refinance existing Floating Rate Notes of £450m. The bond issue was accompanied by an updated valuation of the MAB pub estate which showed an uplift of 40% in the value per pub since the original securitisation in 2003. The updated valuation placed a value of £4.8bn on the 1704 pubs within the securitised estate, compared to £3.85bn for 1942 pubs in 2003. This increase in value reflects the strong trading performance of the estate and its continued development.
On 12 September 2006 the Company announced that the terms of the securitisation had been finalised – and on 15 September 2006 confirmed that £1.1bn had been raised, the resultant total cash interest to the securitisation being reduced to 5.7%.
The pubs within the securitisation are owned by Mitchells & Butlers Retail Limited, a 100% owned subsidiary of Mitchells & Butlers plc, which has a financial year end of 30 September in line with the Group. The performance of the securitisation pubs is reported half yearly on a quarterly basis in line with Mitchells & Butlers plc Interim and Final results in May and December respectively.
In July 2008, on the strength of its cash flow projections the Company refinanced and extended its short term borrowings into a three year unsecured facility to November 2011. As a result of the substantial cash inflow and the expected reduction in debt requirements over the next two years, the facility was set to £600m initially; reducing to £550m from December 2008; £400m from December 2009; and £300m by December 2010.
In May 2009 the long term interest rate swap held against the medium term borrowings was settled at a net cash cost of £69m post tax using a medium term loan agreement with an initial value of £75m. This was appropriate as long term debt in line with the 28 year swap was no longer commercially available and the swap termination clause was in 2010. The additional loan agreement formed a single facility with the existing unsecured medium term facility.
Since this date, due to the strength of the cash generation of the business, the unsecured short term facility has been amended and now has the following profile:
| Commencing after | Facility limit |
|---|---|
| Note: the facility matures in November 2011 | |
| 2 March 2010 | £425m |
| 31 December 2010 | £338m |
As at 19 May 2010, drawings on this facility were £296m.
||Page correct as at: 17 June 2010
