Concerns Raised At Stonegate’s £2.2bn Debt

Concerns have been raised over the future of the UK’s biggest pub chain as it struggles to refinance £2.2bn of debts before 2025.

Stonegate which operates over 4,400 establishments including popular chains like Slug & Lettuce and Be At One said in newly filed accounts that there was a “material uncertainty” around its ability to continue as a going concern.

In its latest annual report, bosses said: “Whilst there is a plan in place for refinancing this debt, as at the date of signing the financial statements there is a risk that it exists over the completion of this exercise.

Despite ongoing discussions with potential lenders, the company has yet to secure new loans to replace existing debt set for repayment in June 2025. This predicament forced Stonegate to raise concerns about its ability to continue operating as a going concern, with uncertainties surrounding its capacity to meet financial obligations and liquidate assets.

Stonegate, based in the Cayman Islands and owned by private equity firm TDR Capital, expanded significantly in 2019 with the acquisition of Ei Group for £1.3 billion. However, this expansion came with a hefty debt burden of £1.7 billion, coinciding with the onset of the COVID-19 pandemic, which severely impacted the hospitality sector through successive lockdowns.

Rising costs and subdued consumer demand have further strained margins for pub and restaurant firms, leading to closures and insolvencies across the sector.

Stonegate’s financial struggles are underscored by its significant debt load, with total debt exceeding £3 billion and substantial finance costs incurred in the previous year. Despite a rise in revenue to £1.7 billion, the company reported losses nearly doubling to £257 million, attributed to various costs including negative revaluation of brands and finance costs.

David McDowall, CEO of Stonegate, said: “I am really pleased with the performance of the business in 2023, which included a sector-leading Christmas trading period. We have delivered a rise in revenue and a significant increase in profitability. Our all-round performance exemplifies the strength and depth of the Stonegate estate, with our outstanding Craft Union and L&T divisions continuing to lead the way. This is testament to the hard work of our people and partners, but also to the success of our on-going initiatives to increase profitability across our portfolio of brands and venue formats.

“Our performance gives me real confidence in the future and excitement in seeing our strategy come to fruition. Notably our asset optimisation plan which makes sure we have the right pub in the right location, further profit improvement initiatives, and above all our efforts to continue to support the Great British pub.

“With a summer of sport on the horizon, and the Euro’s and T20 World Cup fast approaching, we are looking forward to building on this momentum in the months ahead. We have been very clear that we continue to work towards achieving our long-term balance sheet goals, with the successful refinancing of a portion of our estate in December marking a significant strategic step towards this. We would also like to assure our valued employees and partners that venues are not at risk as a result of this process.”

The GMB trade union raised concerns about the company’s debt pile earlier this year, suggesting that failure to address it could place 19,000 jobs within the group at risk.