The Bannatyne Group has finally struck an innovative £92m deal which frees the firm of its bank debt with the failed Anglo Irish Bank.
The Darlington-headquartered business – headed by Dragon’s Den entrepreneur Duncan Bannatyne – reached the agreement with M&G Investments for the sale and leaseback of the ground leases of 39 Bannatyne’s Health Clubs.
The group said the deal, which releases it from millions of pounds of bank debt, provides a strong platform for future development and continuing profits.
All the sites are leased to Bannatyne Fitness Ltd, which is part of The Bannatyne Group and is the UK’s largest independently-owned health club operator, for 125 years on a full repairing and insuring basis with contracted annual reviews linked to inflation. The portfolio comprises 26 freehold and 13 long leasehold properties.
The deal involves the sale of land and buildings and the creation of new long-term ground lease agreements with the new landlord. The company will retain long-term control of the buildings via very long and secure leasehold interests.
Earlier this month Bannatyne offered KPMG, the liquidators acting for the failed bank, a 97p in the pound offer to buy out his borrowings of £115m – an offer he said he would withdraw if it wasn’t accepted by the close of play on February 14.
He said: “This deal has been reached with one of the most successful investment businesses in the world. M&G can see the long-term value of our business and has agreed to be our landlord over a very long lease term. Our premium business is successful, sustainable and profitable and we believe it is an ideal tenant to provide M&G’s investors with reliable returns.”
Ben Jones of M&G Investments added: “This is another high-quality deal that delivers exactly the sort of investment returns our many pension fund clients need. What makes this especially interesting is that it is an attractive and secure way to generate exposure to the leisure sector and provide very long-term secure and index-linked cash flows. It is also notable for it being a bank replacement finance deal – more of the deals we do at M&G are attractive alternatives to bank finance.”