Stonegate Pub Company - Initiation

All,

Please find the initiation of Stonegate Pub Company here.

We are contemplating the roll-out of a wider set of new names for you. The idea is to have an overview on - say 100 names in total, which would then allow us to add deeper research more flexibly on each of these names as and when appropriate. To make this feasible, we are thinking of starting with a 1-Day effort on a bigger range of names and subsequently dig more deeply into those that look interesting.

We have been experimenting with such a 1-Day format on Punch and Oriflame, which you will find under a separate heading “Initiation" below our coverage on the website. Please let us know your thoughts on this format - if you like it, find it useless or have ideas for us.
Thank you!

At 12% - 13%, we find the yield interesting for sterling-secured paper with a premium over the Punch bonds reflecting the higher LTV at Stonegate. A key management strategy is converting some of the tenanted estate into Managed/Operator Partner estate where the EBITDA contribution per pub is higher. The immediate investment play in Stonegate is the recovery of the UK pub industry from both Covid and the current cost of living pressure and the expectation that pub cash flows will recover. The Bank of England is warning of a two-year recession so that recovery will not be imminent. The proportion of the Stonegate estate located in town centres could be supportive of the credit in the short term in the event pubs need to be sold for development. There is capacity in the Unique Pub Estate for significant further issuance, which could provide liquidity to the group if required.

Regards

Aengus

Aengus McMahonSTONEGATE