12th June 2020


Mitchells & Butlers plc

LEI no. 213800JHYNDNB1NS2W10


Covid-19 Financing Update



Mitchells & Butlers is a strong business with an enviable portfolio of freehold properties and brands, a consistent record of clear sales outperformance against the market and an established strategy of strengthening the balance sheet by reducing net debt and gearing. This has put us in good shape to address the challenge we now face.


The full impact of Covid-19 on our trading and financial position is uncertain, depending primarily on the extent of the closure period and the profile of recovery, but we moved swiftly to protect the business through a reduction of cash outflows including: cancelling all discretionary capital expenditure, furloughing of over 99% of the workforce, where possible reaching agreement on extended payment terms, and the elimination of all non-essential operating expenses.


We have also been in close contact with our main creditors and are pleased to announce that we have now reached agreement on a number of new arrangements which provide a platform of both additional liquidity and improved financial flexibility for the group in order to meet the challenge presented by Covid-19.


Facilities and Liquidity


We have agreed with our main relationship banks to the provision of committed unsecured liquidity facilities totalling £250m through to 31 December 2021. This comprises extension to the term of our existing £150m facilities plus the provision of additional facilities totalling £100m. These facilities will be on a new covenant structure, reflecting the revised trading profile of the group through the recovery of its business following re-opening, and continue to be supported by a negative pledge in respect of the group's unsecured assets. The £100m additional facilities are structured under the Government backed Coronavirus Large Business Interruption Loan Scheme.


The group currently has cash balances of £130m, having fully drawn down the existing facilities of £150m. During closure, the EBITDA loss in a four-week period has stabilised at about £15m, including rent. Cash burn before debt service is higher than this, primarily as we pay down supplier balances (which we would expect to reverse on re-opening), at between £30m and £35m per four-week period.  


Secured Financing Arrangements


A number of technical breaches would have occurred under the group's secured financing arrangements (the Secured Financing) entered into by Mitchells & Butlers Retail Limited (the Borrower) as a result of the enforced period of closure and so, in order to prevent such breaches, certain amendments and waivers have been agreed with Ambac Assurance UK Ltd (as controlling creditor of the Borrower) (Ambac) and the security trustee in relation to the Borrower's financing arrangements including:

-     a further waiver of, and amendment to, the 30 day suspension of business provision, where the suspension has arisen because of the enforced closure during the Covid-19 pandemic;

-     a waiver of the six month look-back debt service coverage ratio test up until July 2021 and a waiver of the 12 month look-back debt service coverage ratio test up until September 2021;

-     a waiver of the requirement to appoint a financial adviser which would otherwise have arisen for any periods where the debt service coverage ratio falls to below the required level;

-     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; and

-     a waiver to facilitate drawings of up to £100 million in total under the Secured Financing liquidity facility providing the group with additional facilities in order to meet payments of principal and interest,  provided such drawings are repaid in full at the end of March 2021.

These waivers and amendments are required to provide stability and flexibility to the group in order to manage the Secured Financing structure through the closure period and the rebuild of sales on re-opening, including the provision of additional liquidity facilities against debt service costs of £50m per quarter. In order to secure Ambac's support as controlling creditor of the Borrower for such amendments and waivers, Mitchells & Butlers has given certain undertakings in relation to its own financing arrangements, namely, to secure the £250 million liquidity facilities referred to above, and an undertaking to provide funding into the Secured Financing structure of up to £100 million in line with drawings on the Secured Financing liquidity facility.

In securing these valuable amendments the group has agreed not to pay an external dividend, undertake any share buy-backs or repurchase bond debt until the end of the financial year to 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.





For further information, please contact:


Tim Jones - Chief Financial Officer
+44 (0)121 498 6112
Amy de Marsac - Investor Relations
+44 (0)121 498 6514
James Murgatroyd (Finsbury)   
+44 (0)20 7251 3801


Note for editors:


Mitchells & Butlers is a leading operator of managed restaurants and pubs. Its portfolio of brands and formats includes Harvester, Toby Carvery, All Bar One, Miller & Carter, Premium Country Pubs, Sizzling Pubs, Stonehouse, Vintage Inns, Browns, Castle, Nicholson's, O'Neill's and Ember Inns. In addition, it operates Innkeeper's Lodge hotels in the UK and Alex restaurants and bars in Germany. Further details are available at www.mbplc.com and supporting photography can be downloaded at www.mbplc.com/imagelibrary