Marston's agrees extra £70 million support from banks as pubs stay shut

Bosses at the Wolverhampton-based pubs and breweries group now have the option of borrowing a further £70 million in cash after agreeing an increased bank facility.

It means Marston's has extra financial flexibility as it continues to navigate a crisis which has forced its more than 1,000 pubs to close.

Thousands of staff have been furloughed and the company has suspended rent payments in an effort to ease the burden on its pubs.

"We continue to take a highly prudent approach in our management of the business during this period," the company said in a statement.

"All board members have volunteered significant cuts in pay and fees for the time being and recognise that Marston’s many stakeholders, including employees, tenants and lessees, retailers, customers and communities are facing major challenges."

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It said that the the impact of Covid-19 on its financial and trading performance would depend on how the situation develops and how long it takes to return to normal.

Marston's, which employs around 14,000 people across the UK, is planning not to pay any dividends for the current financial year with the current state of lockdown within the hospitality sector likely to continue for some months.

Future dividends will be reviewed when normal business is resumed.

"The Government has recently announced a recovery strategy to lift lockdown restrictions in phases, including the potential for pubs to reopen in early July," added Marston's.

"However, this timing is by no means certain and is, of necessity, subject to meeting targets relating to containing the virus and the ability to meet ‘secure Covid-19 guidelines’. We await more detail from the UK Government in due course."

The £70m of additional funding is subject to final documentation.

Enough cash to meet obligations

"We believe that this additional 180-day financing facility, together with ongoing government support on employment costs, deferred tax payments and rent and rates relief, as well as continued income from beer sales into the off-trade, provide us with sufficient liquidity to meet our obligations beyond the end of the financial year even if pubs were closed until then.

"We have reached agreement with our banks to amend the company’s covenants for September 2020 and March 2021.

"Separately, as announced on May 7, the company has convened a meeting of its Bondholders for May 29 to seek a limited number of technical waivers and amendments.

"We have made good progress to date towards our debt reduction targets and remain committed to our overall strategy to reduce the company’s leverage over the medium term.

"However, the temporary closure of our pub estate and the additional liquidity described above will impact that trajectory for the time being," the company said.

Marston has an estate of around 1,350 pubs nationally, including managed, franchised and leased pubs.

It is the UK’s leading brewer of premium cask and packaged ales, including Hobgoblin, Wainwright, Marston’s Pedigree and 61 Deep.

The portfolio also includes beers brewed at Banks’s in Wolverhampton, Jennings, Wychwood, Ringwood, and Eagle Breweries and also includes McEwan’s, Courage, Bombardier, Brakspear and Mansfield beers.

To complement the UK portfolio, Marston’s operates a number of brands under license with global brand owners such as Estrella Damm, Erdinger, Shipyard and Kirin.