Whitbread to raise £100m in new shares

Leisure group will use private placement to test the market, diversify financing and escape bank debt
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The Independent Online

Whitbread, the Premier Inn owner, plans to raise £100m this summer through a private placement, where shares are sold in bulk to big institutions rather than the public.

The former brewer turned FTSE-100 leisure group wants to assess the market's appetite for placements so that it can diversify its financing sources, which currently rely entirely on bank debt. It is likely to use its regular advisers, Barclays, Royal Bank of Scotland and Lloyds.

Alan Parker, Whitbread's chief executive, said that he hoped to have completed the fundraising by September. "A private placement would give us choices, options. We're looking to test the market with that kind of instrument to raise debt."

Whitbread's net debt stood at £513.4m according to the latest annual results, announced last month. Although this means that the group is less than 50 per cent drawn on its credit facilities, these are to be reduced to £450m by the end of 2012.

Should the placement be successful, Whitbread will not have to rely on renewing the entire bank debt when it expires in 2013. The group could spread the risk of its financing – vital, given the market volatility of the past three years – by using several types of fundraising.

Mr Parker was speaking in Beijing, where he was a delegate at the 10th Global Travel & Tourism Summit last week. Whitbread's Costa Coffee chain is trying to crack the Chinese market. The coffee shops first opened in Shanghai in 2008 and Beijing last year. They are run as joint ventures with local partners and are set to break even next year. Whitbread has 60 shops between the two cities and plans to open one a week to 2012.

Mr Parker, who leaves Whitbread in November after six-and-a-half years at the helm, said that Costa will expand into several other Chinese cities in the next few years. Guangzhou, a port city in south-west China, and nearby Hong Kong are two target markets.

Andy Harrison, the chief executive at budget airline easyJet, will succeed Mr Parker. He joins Whitbread as chief executive designate in September, allowing a three-month handover.

Whitbread should prove a relatively calm company to steer after the battles at easyJet. Sir Stelios Haji-Ioannou, the airline's founder and largest shareholder, resigned from the board this month and vowed to lead an investor revolt to change the firm's strategy. Mr Harrison announced he was to leave easyJet last December as the long-running battle with Sir Stelios began to take its toll on directors. Sir Stelios has been damning of Mr Harrison's tenure, a source close to the tycoon describing him as "over-rated" earlier this month.

The source was also reported as saying Sir Stelios "felt sorry" for Whitbread shareholders, because Mr Harrison was taking over. Carolyn McCall, the chief executive of Guardian Media Group, will replace Mr Harrison on 1 July.