Pret struggles to pay interest on growing debt pile

By SARAH BRIDGE FOR THE MAIL ON SUNDAY
Updated:


High Street sandwich chain Pret A Manger is seeing profits wiped out by interest payments on the huge debt it has been saddled with by its private equity owner, Bridgepoint Capital.

Figures filed at Companies House by the holding company PAM Group, which owns the Pret brand, show that from the time Bridgepoint took over on April 3, 2008 until January 1 this year, turnover was £190.2million and operating profit was £14.4million.

But hefty interest payments on bank loans and borrowing from to shareholders brought the final pre-tax figure down to a loss of £34.2million. At the beginning of 2008 Pret had relatively little debt and interest payments of only £612,000 a year. 

Pret a Manger store

Struggling: Pret A Manger has been dumped with a lot of debt

The company, founded in 1986 by college friends Julian Metcalfe, 49, and Sinclair Beecham, 51, now owes £175.6million in bank debt and £150million in loans from shareholders. It has only £23.5million cash in the bank.

An independent auditor said of the accounts: 'The question is can it meet its debt payments?

'Companies go bust, not because they are unable to trade, but because they run out of cash and can't meet their debt repayments. A company with only £23.5million in the bank but debts of £325million, looks very unbalanced and this could make it a takeover target or it may have to consider refinancing.'

Pret A Manger finance director Nick Candler told Financial Mail that the figures were misleading and that the company was not under any financial pressure. He said debt repayments were half of what they seemed because the equity lenders, made up of management, Bridgepoint Capital and Goldman Sachs, were not actually taking out their interest payments. 

'It is not interest that goes out in cash terms,' he said. 'We are actually in a strong cash position. The matter of the accounts is genuinely an appearance issue.'

Pret chief executive Clive Schlee said: 'We are relatively conservatively financed and we don't see any need for a change.' 

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