Marston's launches consent solicitation to amend four note classes

By Sarah Lizee

Olympia, Wash., May 7 – Marston's Issuer plc announced a consent solicitation for its £236 million class A1 secured floating-rate notes due 2020 (XS0226787280), £214 million class A2 secured fixed/floating rate notes due 2027 (XS0226790748), £200 million class A3 secured fixed/floating rate notes due 2032 (XS0226792280) and the £250 million class A4 secured floating-rate notes due 2031 (XS0331071026).

The issuer said the consent solicitation is being launched in order to seek the approval of holders to some waivers and amendments relating to the notes.

The need for these waivers and amendments has arisen directly as a result of the closure of pubs, restaurants and other hospitality venues on March 20 by order of the U.K. government as a result of the Covid-19 pandemic, the issuer said.

Marston's Pubs Ltd. and its parent, Marston's Pubs Parent Ltd., have closed all of the 950 pubs within the secured estate, which has had a significant negative effect on the net earnings of the security group, the company said.

The issuer is requesting a limited number of waivers relating to loan events of default and other obligations of the borrower under the facility agreement, and some amendments to facility.

Marston's said the proposals avoid any potential defaults and afford the security group the flexibility it needs to enable the business to “come through these unprecedented circumstances whilst maintaining its value.”

As a direct result of pub closures, Marston's expects to use part of its £120 million liquidity facility to meet in full its quarterly debt service obligations of around £18 million on July 15.

The group said it still anticipates cash revenues to be at sufficient levels to require no further drawings under the liquidity facility.

The group said it intends to start repaying borrowings under the liquidity facility on Jan. 3, 2021, with repayments gradually increasing on subsequent interest payment dates until repayment is made in full on the interest payment date falling on Oct. 15, 2021.

The company said it will therefore be able to meet the required debt service payments due to noteholders in full in spite of the Covid-19 pandemic impact.

Until a period of time after pubs and restaurants have been allowed to reopen without any restrictions, the group expects not to meet its free cashflow to debt service covenant ratio of 1.1 to 1.0. It anticipates that its two financial quarter debt service covenant for the relevant periods ending on June 27 and Oct. 3 will drop to around 0.65 to 1.00 and 1.06 to 1.00 respectively, and then return to above the required covenant level of 1.1 to 1.0 by its first financial quarter of the next financial year ending on Jan. 3, 2021, and its four financial quarter debt service covenant for the relevant years ending on June 27, Oct. 3 and Jan. 3, 2021 will drop to around 1.1 to 1.0, and then return to above the required covenant level of 1.1 to 1.0 by its second financial quarter of the next financial year ending on April 3, 2021.

Therefore, the proposals request technical waivers in respect of the periods ending on June 27 and Oct. 3 and an amendment to reduce the four financial quarter debt service covenant for the relevant year ending on Jan. 3, 2021 to 1 to 1 in order to prevent potential defaults arising in due course.

The issuer said that holders of 48.42% of the outstanding notes have already indicated that they intend to vote in favor of the extraordinary resolution.

The proposals require the approval of the class A noteholders and, if the proposals are approved at the meeting, the approval will bind all class A noteholders and also the class B noteholders.

A meeting for holders will take place at 5 a.m. ET in London on May 29. The meeting may be held by audio or video conference call, due to the pandemic restrictions.

Noteholders who do not wish to attend the meeting but who wish to vote must take action on or prior to 5 a.m. ET on May 27.

The issuer will pay an early consent fee of 0.05% of the principal amount outstanding of the notes to holders who deliver votes by 11 a.m. ET on May 20.

The solicitation agent is HSBC Bank plc (+44 20 7992 6237, LM_EMEA@hsbc.com) and the information and tabulation agent is D.F. King Ltd. (+44 20 7920 9700, marstons@dfkingltd.com).

The pub operator and independent brewer is based in Wolverhampton, England.

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