Laurel to address £1.3bn debt
The Laurel Pub Company will re-finance its existing £1.3bn debt next year. It is to approach advisors in the new year to handle a £1bn-plus securitisation.
It will issue a bond secured against the income of its pub estate - effectively swapping the debt for the bond.
This method of securitisation, pioneered by Nomura and also practised by Punch, is much more economical than traditional bank borrowings and will effectively reduce the amount it will cost in interest to service the debt.
The amount of money a company can raise is judged not on assets but on cashflow.
Ian Payne (pictured), the group chief executive said: "We don't have any exact figures yet. We will draft up a prospectus in February and look to securitise in May 2002."
Guy Hands, one of Britain's most celebrated financiers and head of Nomura's Principal Finance team was one of the original pioneers of securitisation as a way of raising vast sums of money.
Groups such as Nomura use pubs as financial instruments to generate capital. Securitisation is merely a way of securing long-term finance.
Since founding the Principal Finance Group, Hands and his team have bankrolled £10bn, largely through securitisation. It is a method that many other companies are now adopting.
It is understood that Laurel will securitise on order to reduce the cost of its existing debt. The company will look to raise north of £1bn and probably hopes it will cover its entire debt of £1.3bn.
The re-financing would be an alternative to a straight trade sale. Speculation was rife in the national press recently that the company would sell to Pubmaster, the WestLB Panmure-backed pub company. Some analysts believe that Laurel is still for sale but this claim has been hotly denied by the company itself.
Laurel was formed seven months ago when Morgan Grenfell Private Equity (MGPE) paid £1.62bn for the 3,000-strong Whitbread pubs business which included the tenanted estate as well as a string of managed pubs centred on the Hogshead chain. The pubs business was renamed Laurel by MGPE after the acquisition.
Related stories:
Laurel denies approach by Pubmaster (4 October 2001)
Pubmaster looks at possible bid targets (2 October 2001)
