Stonegate Group plans to sell over 1,000 pubs in US$1.32B asset disposal to reduce debt

UK – Stonegate Group has advanced plans to sell more than 1,000 pubs in a deal that could raise £1 billion (US$1.32 billion), aiming to cut down its multibillion-pound debt, according to media reports.

Stonegate Group’s significant debt load primarily originates from its £3 billion (US$3.95 billion) acquisition of rival Ei Group in 2019.

This deal positioned Stonegate as the UK’s largest pub landlord but left it heavily leveraged just before the Covid-19 pandemic forced prolonged pub closures. The pandemic severely disrupted revenues, intensifying financial strain.

The operator, known for brands like Slug & Lettuce and Be At One, is consulting advisers on potentially selling nearly a quarter of its 4,300 venues.

In 2024, Stonegate generated revenues exceeding £1.7 billion (US$2.24 billion) but was carrying debt of more than £3 billion (US$3.95 billion) as of September 29, 2024.

This heavy borrowing stems largely from Stonegate’s 2019 merger with Ei Group, which made it the UK’s largest pub landlord.

The pubs marked for sale, internally called the “platinum” portfolio, are some of Stonegate’s most valuable assets.

An earlier attempt to sell similar assets in 2023 failed. Subsequently, Stonegate securitized the platinum portfolio by securing a £638 million (US$840 million) loan from Apollo, carving out these assets within the business and easing immediate financial pressure.

Industry sources explained this structure enables sales of parts of the portfolio without harming the rest of the business.

The Apollo loan’s non-call period ends in January 2026, allowing Stonegate to explore transactions or refinancing, possibly by selling the pubs in smaller batches.

Owned by private equity firm TDR Capital, Stonegate was established in 2010 by purchasing 333 pubs from Mitchells & Butlers and grew via acquisitions until merging with Ei in 2019.

Rising interest rates and increasing labor costs from higher employer national insurance contributions and minimum wage hikes intensify challenges.

Stonegate’s finance costs amounted to £455 million (US$600 million) in the year to September 2024.

This proposed divestiture aims to stabilize Stonegate’s finances and focus on sustainable growth amid challenging economic conditions in the UK pub industry.

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