Shares in Wagamama owner Restaurant Group (RTN:AIM) jumped 9% to 119p after it refinanced its long-term debts and postponed covenant testing to beyond June 2022.
SIMPLIFIED STRUCTURE
The new facilities comprise a £380 million term loan to 2026 and a £120 million Super Senior revolving credit facility (RFC) to 2025.
They replace all existing loans including the Wagamama bond which was due to expire in July 2022.
The company said the new arrangement will consolidate all financing under the same entity and provide a more efficient funding structure to support the group’s strategic initiatives.
COVENANT LIGHT
The group will be subject to a minimum £40 million liquidity covenant until 30 June 2022 with net debt leverage testing then to resume under the RCF, while testing of the term loan will begin at 31 December 2022.
This will be set at a net debt to EBITDA (earnings before interest, taxes, depreciation and amortisation) of five times and decreasing every six months to four times by December 2023.
The initial weighted cost of debt is 7% which would drop to 6% should net debt to EBITDA fall below two times. In addition, a significant proportion can be repaid without penalty.
As previously reported, net debt at year end to 27 December is expected to be £340 million. While sites are closed the group is losing around £5.5 million a month. The company is due to release full year results on 10 March 2021.
ENCOURAGING TRADING
For the latest three-weeks to 27 February the average standalone delivery and takeaway sales in Wagamama and Leisure sites has been running at 2.5 and five times pre-Covid-19 levels respectively, which bodes well for reopening.
The company said it has the capability to deliver an accelerated opening plan for dine-in trading once restrictions are lifted with all available sites open within two weeks. Under current government guidance indoor venues are expected to reopen from 17 May.
Shore Capital analyst Greg Johnson called today’s announcement ‘highly encouraging’, adding that it removes ‘the risk around refinancing’ and provides ‘significant flexibility to manage through the current crisis.’
