The pandemic leaves The Restaurant Group starved of funds

The pandemic leaves The Restaurant Group starved of funds

The Restaurant Group (TRG) announced a £175 m fundraising by way of placing and open offer, on 10 March 2021, to offset the effects of the COVID-19 pandemic.

The offer price of the fundraise will be 100 pence per share, representing a 10.5% discount to the group’s closing price as of 9 March 2021 (being the last day before the announcement), and is subject to approval by shareholders at a general meeting to be held on 29 March 2021. Major shareholder, Threadneedle, who owns shares representing 18.05% of TRG’s share capital, has expressed its support for the fundraise.

The net proceeds raised will be used for the following:

  • to increase liquidity to protect against any potential resurgence of the Covid-19 pandemic;
  • to reduce debt, and
  • to strengthen TRG's flexibility to capitalise on selective site expansion in its Wagamama (UK restaurants, UK delivery kitchens) and Pubs businesses, where TRG expect there to be good and profitable opportunities

CEO, Andy Hornby, said the following regarding the placing:

‘The COVID-19 pandemic has presented enormous challenges for our sector but the TRG team has responded decisively to re-structure our business and preserve the maximum number of long term roles for our colleagues.  TRG is operationally a much stronger business than twelve months ago. The Capital Raising, announced today, will significantly strengthen the Group's balance sheet and provides TRG with the flexibility to invest in growing our business. Whilst the sector outlook remains uncertain, and we are mindful of continuing restrictions across the UK, we are confident that the actions announced today will allow us to emerge as one of the long term winners.’

The news follows TRG’s announcement on 1 March 2021, whereby the company stated that it had signed commitments for a £500m debt facility in order to enhance liquidity and provide the group with long-term financing, with the loans being due to mature in 2025 and 2026. The loans will also be used to pay off existing debt. Prior to this, the group announced a fundraise shortly after the first lockdown in April 2020, raising gross proceeds of £54.6m, after it fell off the FTSE 250 in the March 2020 quarterly reshuffle (see FTSE 250 quarterly update: Coronavirus causes shake up. For our other FTSE 350 updates, including the latest March 2021 reshuffle, ‘FTSE 350 quarterly reshuffle: which companies are weathering the COVID-storm?’, see our blog).

The travel, leisure & hospitality sector has been hard hit by the pandemic, as lockdown restrictions have forced the industry to close its doors. Research conducted by LexisNexis Market Tracker, shows that the travel, leisure and hospitality sector accounted for four of the top ten highest grossing secondary offers in 2020 and 14% of all secondary offerings in 2020 by volume.  Furthermore, as cited in TRG’s annual report, the number of casual dining outlets in the UK is expected to decline by 30-35% between the end of 2019 to the end of 2020.

Since the start of the pandemic, TRG has undergone a major restructuring, its portfolio now down to 400 sites, compared to 653 sites at the end of 2019. At the same time, there has been massive increase in the food delivery market, which has seen a 40% increase over the past two years and is now worth £9.8bn. The company noted a 250% increase in delivery and take-out pre-covid for Wagamama, and 500% increase for leisure. These ‘encouraging’ figures have contributed to the group’s plans to expand its Wagamama sites.

For more on developments in secondary fundraisings and sector specific listed company market activity, look out for Market Tracker’s upcoming Equity Capital Markets Trend report, where we will take a closer look at trends in IPOs and secondary offers during 2020.

 

 

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