Mitchells & Butlers announced the refinancing of its securitization last week. The additional debt raised will be used to fund the acquisition of a GBP497 million ($942 million) pub portfolio from Whitbread and to return cash to shareholders. The refinancing involves a net increase in securitized debt of GBP655 million, comprising a bond issue of GBP1.1 billion and redemption of existing floating rate notes. The total securitized debt post-refinancing will stand at GBP2.4 billion.
When the original Mitchells & Butlers Finance plc deal was initially launched in 2003, the securitized estate of 1,942 pubs was valued at GBP3.85 billion. This re-leveraging exercise has been made possible by the appreciation of the security estate, which now includes 1,704 pubs with assets that are currently valued at GBP4.8 billion, an increase of 40% since 2003 when the securitization closed.
According to Dresdner Kleinwort Wasserstein analysts, the Mitchells & Butlers securitization has always been the least leveraged within the pub sector. By raising the additional debt against the increased value of its assets, it brings its leverage and coverage ratios in line with other transactions in the sector. Both Fitch Ratings and Standard & Poor's affirmed the existing bonds and provisionally rated the new bonds from triple-A to triple-B, with the senior classes benefiting from an Ambac monoline wrap.
Notably, S&P commented that the Mitchells & Butlers senior-most securitized bonds would have achieved a stand-alone rating of double-A, the highest of any U.K. pub securitization to date.
"Value taps in the whole business securitization market have been relatively uncommon recently, indeed a bigger theme has been debt pay-down our outright redemptions," reported Royal Bank of Scotland analysts.
Analysts at Dresdner said that given the lack of these types of deals coupled with the quality of the securitized estate, Mitchells & Butlers should find favorable reception in the market.
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