28 July 2020 by lberuti
STGATE (Stonegate Pub Company Financing Plc) owns and operates high-street, student, and local community pubs, as well as country inns, late-night bars and venues. It serves customers in the UK in familiar chains including ‘Walkabout’ and ‘Slug and Lettuce’. Last Friday, it finalised the terms of what is the largest Sterling-denominated junk bond issue since 2013. They sold at par GBP950mln of bonds maturing in 5 years and carrying an 8.25% coupon. It is the last part of the financing of last year’s purchase of EI Group (formerly Enterprise Inns), a company boasting 5,000 leased and tenanted drinking establishments under individual names. As you can see on the above grapple, CDS referencing STGATE were very volatile in the run up to the pricing as the new bonds were issued by a different entity, Stonegate Pub Company Financing 2019 Plc. The guarantee language originally included in the prospectus suggested that it may not be qualifying, preventing the bonds to be delivered into STGATE CDS. This issue was addressed with a pricing supplement: “Notwithstanding anything to the contrary in the Indenture or in the Intercreditor Agreement, the Note Guarantee of Stonegate Pub Company Financing plc in respect of the New Notes shall only be released and discharged (a) upon full payment or upon the satisfaction and discharge of the New Notes Note or (b) by defeasance or discharge of the New Note, as provided in the Indenture.” That alleviated orphaning fears, and after trading down from 600bps to 500bps last week, it closed at 670bps tonight.