UK pub, restaurant owners eye debt waivers to ride out crisis

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Pub operator Marston’s (MARS.L) and Wagamama owner Restaurant Group (RTN.L) outlined plans to ride out major hits to sales from Europe’s coronavirus shutdown on Wednesday, including seeking possible leeway on debt commitments later this year.

Prime Minister Boris Johnson on Monday essentially shut down social life in Britain and ordered the most vulnerable to isolate for 12 weeks, as the country steps up efforts to stem the spread of the virus.

Marston’s, whose shares have lost 80% of their value in less than a month, sank another 8% in early trade after it said it was now unlikely to recommend an interim dividend and was in talks with its banking group about the option of waivers for its debt covenants.

Restaurant Group, down similarly as the crisis spread this month to Europe and investors priced in a halt in all leisure activity, also saw shares fall around 2% after it said it was working with its lenders to have covenants waived throughout 2020.

Marston’s, a two-century-old brewer known for its Pedigree, Hobgoblin and Lancaster Bomber beers, said retaining dividend would save the company 20 million pounds and that it still had “appropriate” headroom in its existing credit arrangements.

“We believe that we have sufficient liquidity to maintain operations at a materially reduced level of business,” the company said, adding that early-stage discussions with its bank about waivers had been constructive.

Fellow pub group Mitchells & Butlers (MAB.L) said it could suffer a significant loss in the remaining four weeks to its payment and covenant test date and still clear covenant levels.

However, all of them expected a hit to their sales and profits as the government asked people to avoid pubs, restaurants and theatres to curb the spread of the virus.

Marston’s and M&B forecast significant reductions in their expectations for the year.

Frankie & Benny’s owner Restaurant Group warned that comparable sales would fall 25% in the current fiscal year.

The company said it would slash its capital expenditure for 2020 by at least 45 million pounds from its previous estimate of 75 million pounds.

(This story corrects day to Wednesday in paragraph 1)

Source: Reuters

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