Greene King begins consent bid for five classes of secured notes

By Sarah Lizee

Olympia, Wash., June 23 – Greene King Finance plc began a consent solicitation for five classes of secured notes, according to a London Stock Exchange Notice.

The following notes are included in the consent bid:

• £320 million class A2 secured 5.318% notes due 2031 (ISIN: XS0213358350);

• £265 million class A4 secured 5.106% notes due 2034 (ISIN: XS0252914923);

• £290 million class A5 secured floating-rate notes due 2033 (ISIN: XS0372045798);

• £300 million class A6 secured 4.0643% notes due 2035 (ISIN: XS1401172421); and

• £250 million class A7 secured 3.593% notes due 2035 (ISIN: XS1952146972).

The issuer is seeking approval of some waivers in respect of the financial quarter ending on July 19 of some provisions of a facility agreement dated March 7, 2005 between the issuer and Greene King Retailing Ltd. as borrower.

Specifically, the issuer is seeking waivers for any breach of the free cashflow to debt service covenant, the no material change representation, and the going concern covenant on the financial quarter date falling on July 19 in respect of both the most recent relevant period and the most recent relevant year ending on such financial quarter date.

The issuer is also seeking waivers for any corresponding defaults that would be triggered by any such breaches.

Greene King confirmed that no potential note event of default or note event of default has occurred and is continuing.

A meeting of the noteholders has been convened by the issuer and will be held at 5 a.m. ET on July 15 for the purpose of considering and passing a resolution to approve the waiver proposals which will be proposed as an extraordinary resolution.

To be passed at the meeting, the extraordinary resolution requires a majority of not less than 75% of the votes cast.

“The need for the waiver proposals has arisen as a direct consequence of the Covid-19 pandemic and related mandatory measures implemented by the U.K. government,” the issuer said.

In order to comply with the U.K. government measures, the borrower temporarily closed its pubs with effect from March 21 until further notice and there have been significantly reduced revenue streams, the issuer added.

The borrower said it continues to take active measures to preserve its cash reserves and increase its liquidity reserves to ensure all operating and financing costs can be met at least until the end of the calendar year 2020, including obtaining a new £165 million subordinated loan from Greene King Ltd. on an uncommitted basis.

The borrower has drawn about £26 million of the subordinated loan and applied the proceeds to meet scheduled debt service payments under the notes falling due on June 15, 2020, being the most recent interest payment date.

The remaining portion of the subordinated loan is expected to be sufficient to cover all accrued but unpaid operating costs, all expected operating costs to the end of the calendar year 2020 and all ongoing debt service requirements to the end of the calendar year 2020.

The entire £224 million committed amount of liquidity facilities is available to the issuer to cover liquidity shortfalls, including debt service obligations.

Also, the Greene King group has agreed to limit the recharges to Greene King Retailing so that it incurs no more than £5 million per four-week accounting period in terms of operating costs for the duration of the closure.

HMRC has deferred the borrower's March VAT tax payment of circa £800,000 until 2021, and the borrower's tax payment obligations accrued to the end of pub closures are offset by the VAT refund position for the June 2020 quarter.

The borrower has ceased all discretionary capital expenditure, although it will invest in the maintenance of its estate, to preserve the value of the securitization estate and in preparing the pubs for reopening in line with social distancing guidelines to protect the health and wellbeing of customers and staff.

No restricted payment, other than a permitted restricted payment, including payments under the subordinated loan, may be made during the current financial quarter ending on July 19, nor the following financial quarter ending on Oct. 11, as the restricted payment condition is not satisfied in respect of the previous financial quarter ending on April 26 and it is anticipated that the restricted payment condition will not be satisfied for the financial quarter ending on July 19.

The issuer said it considers that the waiver proposals are necessary as a minimum in order to manage the impact under the transaction documents of the Covid-19 pandemic and the U.K. government measures and to support the borrower during this period.

The information and tabulation agent is Lucid Issuer Services Ltd. (+44 20 7704 0880, greeneking@lucid-is.com).

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