COVID-19 Update re: Noteholder Consent Request

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014.

7 May 2020

MARSTON'S PLC

("Marston's" or "the Group")

COVID-19 Update re: Noteholder Consent Request

Further to the Group's previous announcement on 20 April 2020, Marston's today confirms that it has formally asked the holders of its Secured Class A Notes for a limited number of technical waivers and amendments ("Proposals"). 

The waivers and amendments being requested are required solely as a consequence of the enforced temporary closure of its pubs by the UK Government as a result of the COVID--19 pandemic measures.   As stated in the Group's announcement of 18 March, Marston's is confident that it has sufficient headroom on both its bank and securitised facilities, supported by a 93% freehold estate. As a consequence of this, and the actions management has taken to date, the Board believes that the Group has sufficient liquidity to maintain operations at a materially reduced level of business.  

Noteholders have been asked to respond by 27 May and a meeting is scheduled for 29 May 2020.  A group of noteholders, representing approximately 50% of the total amount of the Secured Class A Notes, were willing to discuss the Proposals prior to this announcement and have already indicated that (subject to client and other approvals) they intend to vote in favour of the Proposals.

Rationale and background to the Proposals:

The UK Government issued a directive on 20 March 2020 in response to the COVID-19 pandemic, requiring the closure of all pubs, restaurants and other hospitality venues in the UK, with immediate effect.   Marston's duly complied with this request and as a result, all 1,350 of the Group's pubs have subsequently remained closed since that date until further notice, of which 950 pubs are held within the Secured Estate ("the Security Group").  

The closure of pubs has unsurprisingly had a short-term negative effect on earnings within the Security Group.  Hence, Marston's is seeking the consent of its Class A noteholders to temporarily waive or amend certain terms to account for the continued closure of its pubs and their gradual re-opening in due course. These include temporary waivers and a limited amendment of the debt service coverage ratio test throughout 2020 and the necessity for an amendment to the 30 day suspension of business clause arising because of the UK Government's enforced lockdown during the pandemic.

The Group is of the view that the Proposals are in everyone's interests for the following reasons:

Security Group's strong performance record:

The Security Group's portfolio has enjoyed an exemplary track record and has performed well within the covenant levels (and indeed Restricted Payment levels) for every financial quarter since the financing was put in place in 2005. We are confident that its performance will recover once the lockdown restrictions are eased in due course.

Sufficient liquidity ensures no loss to Noteholders:

Marston's is not seeking any changes to the scheduled interest or quarterly repayments due to noteholders. It anticipates that a combination of cash reserves held within the Security Group, together with a drawdown of some of its undrawn £120 million liquidity facility, will be sufficient to meet its ongoing quarterly debt service obligations in full, despite the COVID-19 impact.

In addition, to further ensure that liquidity is maximised within the Security Group, it has agreed not to make any distributions to the wider Marston's Group until after 2 October 2021 at the earliest.

Mitigating actions undertaken:

Marston's executive team has continued to take an extremely prudent approach in its management of the business during this period.  Management has undertaken a number of actions available to it to minimise cost and maximise liquidity both within the Security Group and in the wider Marston's Group, including having:

o  cancelled interim dividend payments by the Group for FY2020

o  furloughed c.93% of the Group's 14,000 employees and reduced salaries of the Board and other remaining staff

o  accessed business rates relief and deferred tax payments to HMRC through the Government's business support initiatives

o  suspended all capital and operational expenditure for the foreseeable future, other than essential or routine maintenance spending

o  reduced overhead and other variable costs

o  working capital, including stock levels, being managed very tightly

o  regularly engaged with tenants with a view to ensuring that rent can be paid and tenants are able to recommence trading once the restrictions imposed by the UK Government are eased

o  consulted with larger suppliers that have been supportive in agreeing additional payment terms and readying the Security Group for reopening

In summary, these are unprecedented times.  The need for the temporary waivers or amendments requested is entirely caused by, and a direct consequence of, the effects of the COVID-19 shutdown measures enforced by the UK Government.  Marston's high quality pub portfolio continued to perform well prior to the COVID-19 shutdown and management are confident that it will do so again once restrictions are eased in due course.

ENQUIRIES:

For the purposes of the Market Abuse Regulation (EU) 596/2014 and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this Announcement is made by Anne-Marie Brennan at Marston's PLC.

NOTES TO EDITORS

·      Marston's is a leading pub operator and independent brewer.

·      It has an estate of around 1,350 pubs situated nationally, comprising 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, Jennings, Wychwood, Ringwood, and Eagle Breweries and also includes McEwan's, Courage, Bombardier, Brakspear and Mansfield beers.  To complement the UK portfolio, Marston's operate a number of brands under license with global brand owners such as Estrella Damm, Erdinger, Shipyard and Kirin.

·      Marston's employs around 14,000 people.