Stonegate owner of Slug & Lettuce scrambles in a panic to plug a £2bn hole

Slug & Lettuce’s owner has expressed concerns about the future of his company as he races to refinance over £2bn worth of debt.

Stonegate, UK’s largest pub operator, with over 4,000 locations across the UK, has warned that “material uncertainty” exists about its ability to remain a going concern.

The challenge is to refinance 2.2 billion pounds of debts by 2025.

In their latest annual report, the bosses stated: “While there is a refinancing plan in place, there is still a risk of it not being completed as of the date that the financial statements were signed.”

It said that if the company was unable do this it “may not be able to realise its assets or discharge its liabilities during the normal course business”.

Stonegate, a private equity firm owned by TDR Capital and based in the Cayman Islands, is also a joint owner of Asda.

Stonegate also runs the Be At One, Popworld and Craft Union bar brands.

Stonegate’s debts at the end its financial year were in excess of £3bn, with some of it linked to its purchase of pub chain Ei Group.

The deal that made Stonegate Britain’s biggest pub operator valued Ei at £3bn , of which £1.7bn  was debt.

The pandemic has pushed up interest rates, putting pressure on companies with large debts.

Fitch warned in January that it might have to lower Stonegate’s rating if the company cannot refinance a £2.2bn debt load.

In February, it was revealed that Stonegate had hired Evercore and Kirkland & Ellis as advisers to help evaluate its options.

Stonegate issued the warning after signing a deal to refinance its portfolio of 1,000 pubs in December for £638m.

David McDowall said, “We continue to work toward achieving our long term balance sheet goals. The successful refinancing a portion our estate in December marked a significant step towards this.”

Stonegate’s financial problems come after it was criticized for introducing a so-called “surge pricing” in 800 pubs of its last year. Customers were charged up to 20p per pint more when there were football matches or other events on.

Stonegate stated at the time that this would cover increased costs associated to big events, such as extra security and staff.

Gary Lindsay, managing director at TDR Capital told the Business and Trade Select Committee in January that he was “confident’ Stonegate could refinance their debts.

Accounts show that revenues at Stonegate increased by just under £100m, to £1.7bn, over the course of the year ending September 2023. The company recorded a loss before tax of £257m.

Stonegate’s accounts stated: “While macroeconomic conditions continue to impact the group, and the cost-of-living crisis has resulted in lower profits and operating cash flow than would have otherwise been the case, the group has delivered an extremely respectable performance.”

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