Stonegate Eyes Major Sale to Cut Mounting Debt Burden

Britain’s largest pub company is preparing for a substantial sale, aiming to offload over 1,000 pubs as mounting debt threatens its future. Senior management at Stonegate Group, owner of the well-known Slug and Lettuce and Be At One chains, have commenced talks with advisors regarding options for nearly a quarter of the firm’s 4,300-strong estate. Industry sources estimate the sale could fetch as much as £1 billion for the group.

Stonegate recorded revenue of more than £1.7 billion last year but is currently contending with over £3 billion in debt. Most was accumulated during its £3 billion merger with Ei Group in 2019, a transaction that made Stonegate the nation’s largest pub landlord. The burden proved especially challenging as the deal completed shortly before the Covid pandemic forced widespread pub closures.

The pubs under consideration for sale form what Stonegate calls its platinum collection, a portfolio of 1,034 sites, widely regarded as among its best assets. Despite an attempt in 2023 to sell a similar number of properties, the group instead secured a £638 million loan from private equity house Apollo, using the pubs as collateral and transforming them into a self-contained company division. This move provided temporary financial relief but necessitated the strict structuring of potential sales, limiting immediate options to raise funds.

The end of a restrictive period on Apollo’s loan in January will allow Stonegate to proceed with sales or refinancing efforts. Executives are believed to favour selling in smaller groups of hundreds of pubs, rather than as a single package, to optimise interest from private equity and sector investors. All the platinum pubs are freehold and located in England and Wales.

Recent company accounts show finance costs reaching £455 million in the year to September 2024. Since then, high interest rates, wage increases, and elevated employer national insurance contributions have further pressured margins. Fitch downgraded Stonegate’s credit rating to CCC plus last August, reflecting industry apprehension over its ability to service debt as operating costs surge. The platinum collection, held separately, was not affected by the ratings downgrade and currently generates approximately £90 million in annual ebitda.

Stonegate’s chief executive, David McDowall, who joined from BrewDog in 2023, has launched a transformation plan aimed at returning the business to profitability after a £214 million loss last year. The strategy focuses on converting company-run pubs to tenanted and leased models, now delivering an average profit boost of £110,000 per site and mitigating labour cost exposure. The group is majority owned by private equity firm TDR Capital, also known for backing Asda, the supermarket chain.