Foster's First Step In Uk Restructure
The Age
Saturday November 19, 1994
Foster's Brewing Group yesterday unveiled a first step in the restructuring of its British operations by announcing a refinancing of its Inntrepreneur Estates pub joint venture, and the impending sale of 320 pubs for 203 million ($A425million).
The long-awaited announcement followed months of speculation that Foster's British subsidiary, Courage, and its hotel partner, the Grand Metropolitan group, were close to completing a repackaging of the IEL operation, which incorporates around 6400 pubs.
Under the deal, GrandMet will relinquish its running of the pubs in favor of independent management, and Courage and GrandMet will inject around $60million each of new equity.
The IEL partners are understood to have refinanced some 800million of debt, which will represent the balance of borrowings after the funds raised from the sale of the 320 Chef and Brewer pubs are applied against existing debt.
Foster's said that pubs would be transferred to a subsidiary of the investment bank Morgan Grenfell by the end of this month. The merchant bank Kleinwort Benson and property agents Jones Lang Wootton have been appointed as advisers for the sale of the properties.
The pubs are already leased to the rival Scottish & Newcastle brewing group, although Courage has a guaranteed supply agreement on the Chef and Brewer operations - which represent two per cent of Courage's total volumes - until 2000.
S&N has an option over the pubs, but other brewers including the Whitbread group are said to have undertaken initial due diligence on the operations.
Analysts said the restructuring and refinancing clearly placed the group in a much stronger position.
But a Foster's spokesman said the restructuring in no way indicated that Courage and GrandMet were grooming the total IEL venture for sale.
Foster's managing director, Mr Ted Kunkel, has gone to great lengths to impress on the market that his group believes there is a future in British brewing.
The IEL pub joint venture, formed in March 1991, encompasses more than 4600 tied outlets (pubs which are contracted to beer supplied by Courage), and 1760 operating as free-of-tie estates with no obligation to buy beer from Courage.
Foster's said the refinancing of the IEL venture was expected to become effective in late January, and at that time IEL would cease to be managed by GrandMet Estates and would be operated by its own independent management teams.
Courage and GrandMet will continue as 50:50 shareholders in IEL, and will have equal board representation.
Foster's said the key points of the refinancing were: Renegotiation of IEL's loan facilities. This includes GrandMet's interest-bearing loan to IEL of 360 million being repaid.
Shareholder equity in IEL rises to 424million as a result of the conversion by Courage and GrandMet of their existing interest-free loans of 84.5million each to equity.
Courage and GrandMet will each contribute 28million of new equity.
Taken into account is a temporary diminution of 20million, or 1.4 per cent, in the value of the pubs following an independent valuation at 30 September.
© 1994 The Age
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