Debt-for-equity swap likely at Admiral

Lloyds Banking Group is likely to swap its debt in Admiral Taverns for equity, according to Companies House documents filed several months late by the tenanted pub company.

Documents state that Admiral Taverns has been in discussions since last October over debts of £855m with Lloyds Banking Group and £106m of loan finance with a secondary banker.

Lloyds Banking Group is likely to write around £450m worth of debt off in line with Admiral Taverns earnings dropping from around £100m to just over £50m after the recession hit the performance of the company.

Admiral, which is owned by Landesberg and Rosenberg families, reported: "Discussions have taken place between the interested parties regarding the preferred options of a debt-for-equity swap by the principal banker or the introduction of significant additional equity by new equity investors.

"Under both of these options, the total level of debt will be substantially reduced to a sustainable level, sufficient to enable the group to service the debt from current forecast cash flows.

"The most likely option is a debt for equity swap by the principal banker.

"However, no detailed discussions have taken place or agreements reached regarding amounts and percentages of debt to be written off.

"In the event that agreement can't be reached for either of the preferred options, the directors believe that a non-consensual deal is likely that would place Admiral Taverns (Napier) Limited in to administration."

Pub sale value dive​ 

Admiral raised around £100m last year through pub sales — it is thought pubs were selling for around an average of £330,000. Sources indicate that pub sale values have dived this year to below an average of £200,000.

The company is divided into three divisions — core, turnaround and disposal. The turnaround division, which is run by Peter Brook, is thought to have seen barellage halve over three years from around 150 barrels to 75 barrels, although that figure is thought to include closed pubs. 

It is also understood that Admiral is currently spending £5m a year on the cost of closed pubs. Accountants PricewaterhouseCoopers has been working on behalf of Lloyds Banking Group, which inherited the Admiral loans in the wake of its takeover of HBOS, to seek a new equity investor in the business.

One source said: "There is a decent core business of at least 1,000 pubs. The turnaround division is being touted as an investment opportunity but needs a lot of capital expenditure.

"One problem is that beer volumes have been free-fall and the alternative use market seems to be a lot weaker this year than last year."

Admiral Taverns has bought more than 3,000 pubs from major operators like Punch, Enterprise and Greene King since it was founded in 2004. The buying spree culminated in the acquisition of 869 pubs from Punch Taverns in 2007.

Last year, the company declared it wasn't buying pubs for the time being and would focus on paying down debt. Admiral raised around £106m last year and was targeting around £60m this year.