Securitisation and debt information

On 12 June 2020, the Group announced revised financing arrangements that had been agreed with our main creditors to provide a platform of both additional liquidity and improved financial flexibility in order to meet the challenge presented by Covid-19. This is represented by £100m of CLBILs and revolving credit facilities of which £10m was drawn at the balance sheet date.

In addition, as part of the revised financing arrangements, certain amendments and waivers were agreed within the Group securitisation to provide stability and flexibility to the Group in order to manage the Secured Financing structure. These arrangements are summarised in the notes to the accounts.

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.

What is securitisation?

Securitisation is a way of raising finance secured on identifiable cashflows from a particular set of assets. Almost any assets that generate a predictable income stream can be securitised.

A ‘whole business securitisation’ is a term used to describe a securitisation where the cashflows derive from the entire range of operating revenues generated by a whole business (or a segregated part of a larger business). These have been used by a wide variety of businesses to raise finance i.e., Welcome Break, Road Chef, Westminster Healthcare, London City Airport, the Tussauds Group and many pub companies.

There is no formula that determines whether a business is suitable for securitisation. However, in whole business securitisations, the businesses in question produced stable, predictable cashflows.

Ratings agencies determine whether they believe that the income levels generated from the assets can be maintained by stress-testing the ability of the company to continue to generate revenues through different economic and market dynamics.

In order to protect the quality of the assets in the business, a securitised company generally agrees or ‘covenants’ to maintain the assets to a certain standard, and not to sell the assets without consent. In addition, the Company generally agrees to use the cashflows generated by the assets in the first instance to pay the interest on the debt as well as to meet the repayment obligations.