Owner of Glasgow’s Horse Shoe bar in £350m fundraiser to ease lockdown pressure

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By Scott Wright

MITCHELLS & Butlers, the leisure giant behind a raft of famous pubs such as The Horse Shoe Bar in Glasgow, has launched a “critical” £351 million fundraiser to stabilise its financial position as it burns through huge amounts of cash during lockdown.

The company, which owns the All Bar One, O’Neill’s, Toby Carvery and other chains, announced yesterday an underwritten fully pre-emptive open offer in response to the deterioration of its liquidity arising from the coronavirus pandemic. The offer was underwritten by majority shareholder Odyzean, which holds 55 per cent of the issued shares in the company.

Pubs in Scotland have been closed since Boxing Day under restrictions to suppress coronavirus infection rates, with outlets in England following suit at the start of the year.

Under a roadmap out of lockdown announced by Prime Minister Boris Johnson yesterday, it will be April 12 at the earliest before hospitality is allowed to reopen in England, and even then it will only be for service in outdoor areas such as beer gardens. It will be May 17 before indoor hospitality reopens in England, according to the roadmap, with M&B saying it was “disappointed” the industry was at the “back of the queue” when it comes to reopening. It urged the UK Government to provide further support for the industry, including the extension of the furlough.

A spokesman said: “We’re disappointed in the Government’s decision to yet again push the hospitality sector’s reopening to the back of the queue. This decision further highlights that urgent financial support for the industry is required, as the current package does not nearly go far enough.”

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The Scottish Government will publish its framework for easing lockdown restrictions today.

M&B, which runs around 1,700 pubs across the UK, estimates it has been burning through between £30m and £35m for every four-week period since its estate was closed in early January. The company also has securitised debt serving costs of £51m per quarter, it noted yesterday, while all non-essential capital expenditure continues to be suspended.

The open offer was cited by the business yesterday as “critical for the continued operation and financial stability of the Group, for managing the business through the current pandemic and, ultimately, to deliver long-term, sustainable growth to Mitchells & Butlers’ shareholders.”

Chief executive Phil Urban said: “M&B was a high-performing business coming into the pandemic and with the support of our main stakeholders, including the equity injection from this open offer, we have every confidence that we can emerge in a strong competitive position once current restrictions are lifted.

“The hospitality industry has done everything that has been asked of it to date and, now that the vaccines are being rolled out and infections are dropping, we are hopeful that pubs and restaurants will soon be allowed to reopen safely so that we can start to serve our customers again.”

The company said the new funding would allow it reduce its unsecured debt, and support its debt financing through an injection of equity, allowing it to meet its fixed obligations. It added that the funds would allow it to resume investment in its estate.

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Mitchells and Butlers had earlier this month struck a deal with its banks for a new £150 million three-year, unsecured revolving credit facility, which was subject to completion of the open offer.

Under the open offer, new shares are being offered to all qualifying shareholders at a price of 210p per share, on the basis of seven new shares for every 18 exiting shares.

In an operational update released to the City yesterday, M&B reported that, in the period between September 27 and January 16, total managed sales were 69.8 per cent lower compared with the same period the year before. Like-for-like sales, for sites when open and excluding period of closure, were down by 30.1%. M&B said it had a cash balance of £113m on January 16, with all facilities drawn.

Shore Capital said in a note for investors: “As the hospitality industry reopens and trading recovers, we would anticipate a return to pre-pandemic multiples, especially with the potential for stronger operators, such as Mitchells & Butlers, to gain market share. However, the road to recovery is uncertain and we continue to see better value in other domestic recovery plays, especially if the shareholder structure weighs on valuation.”

Shares closed up 4.5% at 337.5p.

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