Thu 26th Oct 2023 - Exclusive: Restructure provides D&D with stronger balance sheet Exclusive – restructure provides D&D with stronger balance sheet: The restructure of D&D London, which was part of its recent acquisition by Calveton, the backer of Byron, and Breal Capital, which earlier this summer acquired Vinoteca, has resulted in the business having a stronger balance sheet. David Loewi, D&D's chief executive, said: "The recent acquisition of D&D London by Calveton and Breal was for the trading entities of the business and was transacted via a pre-pack to allow a balance sheet restructuring. The only company affected is Panther Partners Limited as Topco, with all other entities remaining solvent. Various institutional and management loan note holders have had their debt compromised as part of this transaction with the overall result being a group with a stronger balance sheet.  There has been no impact upon trade creditors or employees as part of this transaction and existing arrangements remain in place with the trading entities." As part of the restructure, Calveton and Breal bought D&D London for £45,884,764.  Breal and Calveton paid a cash consideration of £610,250, and £45,274,516 of secured debt owing to the senior lenders, for D&D, which operates circa 30 restaurants across the UK and internationally. Propel understands that continuing to trade the business outside of an insolvency process was not a workable option, as on a consolidated basis, D&D was forecasting an imminent cash requirement in excess of £9m, and that a required immediate injection of funds was not forthcoming from either shareholders or lenders. In a report by administrators Interpath, it said no offers were received for the share in the company on a solvent basis. It said: "This is likely to be as a result of the significant debt, totalling approximately £135m owing to the senior lenders, mezzanine lenders, the investor loan note holders and the management loan note holders. The only offers that were received were for the company's assets on a pre-pack basis." Earlier this month, Calveton/Breal said its investment brought about a circa £40m balance sheet recapitalisation that it said gives the group "a clear runway for continued success". Both Calveton and Breal said they have proprietary capital "patient" money, unlike institutionally backed private equity funds with exit time horizons. D&D said its existing shareholders, Beechbrook Capital and D&D management would be selling down to its new shareholders but will remain as investors, with HSBC and Santander continuing to provide debt. The two investment firms – Breal and Calveton – set up a new company – Bresand Leisure – to facilitate the acquisition, owning 50% of the share capital of the new entity each. The administrators report said the valuation of the business is based on Ebitda for 12 months to September 2023 totalling £3.5m, and that the total consideration for the transaction results in a "theoretical pre-adjusted Ebitda multiple for the group's Ebitda generation of 13 times". It said on the Breal and Calveton bid: "The offer represented 'market value' for a deliverable and executable transaction following a thorough and detailed M&A process that was undertaken over a three-month period and for which 150 parties were approached." The marketing process led to 43 parties expressing an interest in signing a non-disclosure agreement. In addition to the above the company identified further 71 trade parties that were also approached. The report said: "Initial interest was received from 11 of those parties who signed a non-disclosure agreement and received further information regarding the opportunity. Tena indicative offers were received by the deadline of 20 July, of which seven parties were progressed to a further round of due diligence. The seven interested parties that progressed were then invited to submit revised offers by 11 August. At this point, the board chose to progress with five parties to a further round of detailed diligence. All offers received remained on a pre-backed basis. Parties were then invited to submit further revised offers by 15 September. All five parties remaining in the process at this point had not completed the diligence by this deadline and given the competitive nature of the process they were all invited to provide their best and final offers by 3 October. Three parties submitted best and final offers by this deadline. Two of the three offers submitted by the best and final offer deadline were supported by the senior lenders. The other offer did not have the support of the senior lenders. On 3 October, following meetings held with the senior lenders in which the offers received were presented, the board resolved to select an offer submitted jointly by Breal Capital and Calveton Group. This decision was primarily based on a combination of the overall value, senior lender support and the deliverability of the offers presented in the limited timeframe available." The sales process for D&D went under the name Project Sandon. As previously revealed by Propel, Aqua Restaurant Group, the Handa family and JKS Restaurants were all thought to be among the parties that showed an interest in D&D. Its co-founder and former chief executive Des Gunewardena, who owned a circa 14% stake, was also among the interested parties. D&D features in the Propel Turnover & Profits Blue Book. Group revenue over the 15 months to June 2022 was £163m, or 90% of pre-covid levels, while earnings were £17m, or 122% of pre-covid. The Blue Book ranks companies by turnover, profit and profit conversion, listing directors’ earnings for the past five years. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email kai.kirkman@propelinfo.com to upgrade your subscription.