Jump to content
House Price Crash Forum

Recommended Posts

Credit due to Reuters news feed which is where I pinched this from...

LONDON, Aug 2 (Reuters) - Private equity firm Bridgepoint's coffee and sandwich chain Pret A Manger has raised a new 375 million pound ($568.5 million) loan to refinance existing debt and pay a 150 million pound dividend to shareholders, sources with knowledge of the deal said on Friday.

Bridgepoint bought Pret in 2008 in a deal backed by 220 million pounds of debt, according to Thomson Reuters LPC data. It decided in June to get value out of the company by conducting a dividend recapitalisation - a refinancing process that increases a company's debt to allow a payout.

Out of the 375 million pounds of new loans raised, 150 million pounds will be paid via a dividend to shareholders including Bridgepoint, management and Pret's founders, two of the sources said.

European loan investors have traditionally frowned on dividend recapitalisations, and they tend only to be used in bull markets.

Bank of Ireland, BNP Paribas, HSBC, ING, Rabobank, Royal Bank of Scotland and Societe Generale underwrote the new 375 million pound refinancing which includes a 40 million pound term loan A, paying 450 bps over Libor; a 265 million pound term loan B, paying 500 bps over Libor; a 30 million pound revolving credit facility, paying 450 bps over Libor; and a 40 million pound capital expenditure facility, paying 450 bps over Libor, three of the sources said.

The term loan B was sold to investors at a 2 percent discount and allocated on Europe's secondary loan market on Thursday. It was quoted on Friday morning at 98-98.5 percent of face value, four of the sources said.

By raising a new loan, leverage on the company increased to 4.17 times its EBITDA from a level of below 2 times in 2012. When Bridgepoint acquired the business, Pret's leverage was over 5 times, banks said in a statement in June when the deal was first announced.

.

As always with these venture vulture capitalists privatise the profits and socialize the losses.

Edited by longtomsilver2

Share this post


Link to post
Share on other sites

I think I remember the days when you'd be locked up for doing something like this.

Thankfully they got rid of regulations that stopped it.

We need to borrow more we do.

Share this post


Link to post
Share on other sites

The business model is uncannily similar to that of a person building a BTL empire. Buy a perfectly sound business/property leverage up by securitizing the debt on future earnings/rental income. Rinse and repeat 1 or a thousand times hollowing out as you go.

When owning the company in the legal sense isn't really owning or having an interest in the company at all.

Share this post


Link to post
Share on other sites

Is it normal to take out a loan to pay a dividend?

I guess if the person taking out the loan owns a number of the shares, it is.

Perfectly legal-divis are payable out of retained earnings which are not necessarily the same as cash(eg you may have a high capital expenditure programme or working capital funding if you are growing rapidly).

If the recipeint of the divi is in a benign tax regime(think Mrs Philip Green in Monaco)then divi may only b etaxed at the lower rate of income tax and the loan will be deductable for corporation tax-net effect being the divi is effectively tax free.

Share this post


Link to post
Share on other sites

Isn't this exactly the same sort of thing that killed Phones4U?

Yes but at least Pret doesn't exist at the whim of an oligopoly of its only suppliers, so there is much higher sustainability of Prets business model.

Of course it is still a joke. Taking a sandwich shop 4x geared, with very high interest rates to cash out before credit markets close is irresponsible.

Share this post


Link to post
Share on other sites

Isn't this exactly the same sort of thing that killed Phones4U?

Exactly which is why I posted here. The writing is on the wall. With so much leverage in play it doesn't take much to have the rug pulled from under it. Greggs are now doing nicer baguettes and competing on price with the now industry standard £3 meal deals. There's no wiggle room.

Edited by longtomsilver2

Share this post


Link to post
Share on other sites

As private co We don't get financials. I wonder what are their assets as they appear to have a lot of debt ?

As far as I can remember they sell sandwiches and coffee so suspect the assets maybe the brand intangibles. Now I am going to laugh a bit because that is some special dividend. Oh didn't Foxtons do one of these special dividends And biggest asset is intangibles.

Edited by Ash4781

Share this post


Link to post
Share on other sites

Is it normal to take out a loan to pay a dividend?

I guess if the person taking out the loan owns a number of the shares, it is.

pret a manget is just way too feckin poncey anyway.

their business model only succeeds in the square mile, who have more money than sense..or airports where joe public ain't got much choice.

£4.99 Or whatever it is for some bacon butty(without much butter) served with a delicate garnish of balsamic-vinigarette tossed rocket(or lettuce in normal speak) is a bit steep doncha think?.

..almost forgot they do give yo a bottle of the finest peckham springs mineral water with it.

pasta-la-vista baby! (this is my instant fast food italian pasta chain which will clean out mcdonalds and kebab shops after nightclubs)

I could probably do some kind of glorified soup-kitchen thing as well, but i think theres a guy in milton keynes who beat me to it!

Edited by oracle

Share this post


Link to post
Share on other sites

Exactly which is why I posted here. The writing is on the wall. With so much leverage in play it doesn't take much to have the rug pulled from under it. Greggs are now doing nicer baguettes and competing on price with the now industry standard £3 meal deals. There's no wiggle room.

Greggs is terrible they sell cheese and ham baguettes with no butter/mayo or salad cream, you cant buy it as an extra.

Only place to get decent sandwich from is your local privately owned place, all the chains sell dreadful sandwiches.

Share this post


Link to post
Share on other sites

It does look perverse. But the perversity is in the system, and is fundamentally down to cheap money.

At a guess:-

For pret a manger it makes sense because debt is too cheap.

For the shareholders it makes sense as it gives them a good and probably tax-efficient yield.

For the lenders it makes sense because their debt is too cheap, too, and perhaps also because they regard themselves as having an implicit bailout.

Blame the system, not the players!

Share this post


Link to post
Share on other sites

We had a pret open up by my office. I can't believe how busy it always is, any hour of the day (that they're open) and its packed. Personally I don't see the appeal.

You have people going there because they want to feel rich. They've actually started selling half a sandwich at near enough full price spurred on by the incentive of losing weight. You have women paying six quid for one slice of bread with a "low fat" filling inside and thinking its alright.

As others have said, dixons / phones4u mark ii. I do wonder what their staff think of this. Unfortunately kicking up a fuss will spell a blotch on their CV and no money through the door, so it'll be gotten away with.

Share this post


Link to post
Share on other sites

If my profession was in finance, I could start a private equity company, and the sole strategy is to look for the top 100 firms with the lowest debts on their books. Then one by one take them over, and make use of these low interest rates, to pile on the debt, extract it as a one off management fee, and say thanks for the fish! The Phones4U would be a model for the strategy.

As these low rates are going to continue forever, then we're pretty much set up for enough work for decades to come! Hurrah, see you on the golf course!

http://www.housepricecrash.co.uk/forum/index.php?/topic/200912-why-are-the-middle-classes-not-rioting-telegraph-article-merged/page-5#entry1102594842

Looks like someone read my post and did the same thing that morning.

Share this post


Link to post
Share on other sites

I think people will start to make use of the low rates, and keep extracting money out of the "system" this way, until the lenders cannot take any more defaults, only then interest rates will rise "properly".

When will this happen?

Share this post


Link to post
Share on other sites

I think people will start to make use of the low rates, and keep extracting money out of the "system" this way, until the lenders cannot take any more defaults, only then interest rates will rise "properly".

When will this happen?

When there is a liquidity event. The house of cards is stacked up quite high, the collapse will be quick and significant.

Share this post


Link to post
Share on other sites

Greggs is terrible they sell cheese and ham baguettes with no butter/mayo or salad cream, you cant buy it as an extra.

Only place to get decent sandwich from is your local privately owned place, all the chains sell dreadful sandwiches.

Put that cheese and ham in the microwave for 60s and then lace it with sweet chilli sauce. It's a taste sensation.

Share this post


Link to post
Share on other sites

Greggs is terrible they sell cheese and ham baguettes with no butter/mayo or salad cream, you cant buy it as an extra.

Only place to get decent sandwich from is your local privately owned place, all the chains sell dreadful sandwiches.

Got to say I never add butter or marg. to sandwiches prefer them fat free...guess it suits me but probably not most people.

Share this post


Link to post
Share on other sites

the lenders must surely have done decent amounts of due diligence before dishing out £375m at LIBOR + 4.5 / 5.0

they are big boys and girls and it is their call

except for those that had to be bailed out by the taxpayer of course... surely their shareholders (HM Government) don't want their banks lending in schemes like this? What is the Chief Secretary to the Treasury doing instead of keeping on eye on taxpayers investments - celebrating the opening of a food bank?

food-bank.jpg?w=300&h=225

Share this post


Link to post
Share on other sites

Got to say I never add butter or marg. to sandwiches prefer them fat free...guess it suits me but probably not most people.

Fat isn't what makes people overweight, carbohydrates do that. Most fat is actually pretty good for you and if you do a keto diet you can lose a lot of weight just eating fat and protein and a very small amount of carbs <50g per day.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   209 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.