6.8% Premier Capital plc 2017 – 2020

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Premier Capital plc - Prospectus dated 1 March 2010

The Company

Premier Capital plc, the parent company of the Premier Group, is equally owned by the 3 Hili brothers (Marin, Beppe and Melo). The company acquired 78.8% of the McDonald’s operation in Malta in 2005 and in 2007 became the development licensee for McDonald’s in Latvia, Lithuania and Estonia following the 100% acquisition of the McDonald’s restaurants in the Baltic States. The development license agreement presented the Group with the responsibility of developing the McDonald’s brand whilst also having the right and responsibility of opening new restaurants in Malta and in the Baltic countries. Currently the Premier Group’s portfolio is made up of 30 restaurants split up as follows: 8 in Malta, another 8 in Lithuania and 7 restaurants in each of Latvia and Estonia. In 2009, 1 restaurant in Latvia and another 2 in Estonia were opened while another McDonald’s outlet will be opened in a shopping mall in Estonia in April 2010.

The majority of the properties hosting the McDonald’s outlets are held under long-term lease contracts or concession agreements. The Premier Group owns only one of the restaurants in Lithuania and it has a further 4 properties in Latvia and Estonia which are rented out to other companies within the Group. The Premier Group aims to acquire some of the new restaurants that it intends opening and the Prospectus states that two properties have already been earmarked for potential acquisition and development subject to the requisite permits. The Maltese operating company, Premier Restaurants Malta Ltd., has reportedly identified premises in the South of Malta for re-development as a drive-through McDonald’s restaurant similar to the one situated at Malta International Airport. Meanwhile, in Estonia, a plot of land has been identified for the construction of another McDonald’s restaurant.

The Premier Group’s business falls within the retail food sector, more specifically under the ‘Quick Service Restaurant’ market. This business is dependant upon a number of factors namely:

  • Restaurant sales –  which is in turn influenced by other aspects such as the opening of new restaurants, pricing and product mix, the introduction of new products, advertising campaigns and in some cases seasonality.
  • Cost of food and packaging material – in this respect the European Supply Chain Group works closely with the system suppliers to source high quality products and services at competitive prices.
  • Cost of labour – staffing levels may vary depending on transaction volume and are primarily driven by the time of the day.
  • Occupancy and other related expenses – these include restaurant rental or concession payments and all associated utility costs.

The Premier Group’s strategy is two-fold. On the one hand the Group intends expanding by increasing penetration with new stores in both existing and new geographical markets and thereby increase its market share. The Premier Group believes that there is significant potential to expand the McDonald’s brand in the Baltic States given the much larger population of these three countries when compared to Malta and the lower penetration rate at present. The McDonald’s franchise already has a high penetration rate in Malta which is comparable to the more developed city centres in Western Europe. However the Premier Group believes that further expansion in Malta is sustainable mainly by means of further geographical diversification of its restaurants across the island. Moreover, the changing gastronomic habits of the younger generation and the increasing mobile population are believed to create appropriate parameters for further expansion in Malta. The Premier Group believes that the Baltics are untapped markets since there is currently only 1 restaurant for every 300,000 persons, compared to the ratio of 1 restaurant for every 50,000 persons in the UK. Since the Baltic countries are believed to have more potential for growth (similar to the current expansion in Russia and a number of Eastern European countries), the majority of the bond proceeds will be used to fund the expansion of restaurants mainly in the Baltics and the re-modelling of others during the next 24 months. This will also include the introduction of McCafes. The recent re-modelling of a number of restaurants in Malta and the Baltics has so far been financed through a combination of bank borrowings and internally generated cash flows from operating activities. The Group intends accomplishing its expansion goal by acquiring land/premises to develop 8 new McDonald’s restaurants in key locations, thereby increasing the portfolio to 38 restaurants.

Meanwhile, the Premier Group aims to continue to improve its revenue and profitability through the re-modelling of a large number of the current stock of restaurants, improve efficiencies and cost controls as well as through an eventual series of price hikes in the Baltic States restaurants.

Use of Proceeds

The net proceeds from this bond issue will be principally used by Premier Capital plc for:

  • Expansion & Development: €11.85 million (or €16.8 million in the event of oversubscription) will be utilised for financing the Group’s expansion and development programme over the coming 2 years. The Premier Group intends to acquire 8 new McDonald’s restaurants in Malta and the Baltic States but it does not exclude the entry into new territories. Part of the bond proceeds are also intended to be used to remodel existing McDonald’s outlets through conversion into hybrid restaurants and McCafes.
  • Debt Financing: €7.6 million will be utilised to part-refinance the Group’s existing bank debt.

Security & Status

Unsecured & Unsubordinated

Coupon

6.8%

Amount Issued

€25,000,000

ISIN Code

MT0000511205

Interest Payment

Annually on 15 March

XD Date

1 March

Maturity

The bonds will be redeemed at 100% (par) on 15 March 2020 but may be redeemed on any day between 16 March 2017 to 14 March 2020

Listing

Official List

No. of Bondholders

3,713

Directors

Marin Hili, Melo Hili, Beppe Hili, Richard Abdilla Castillo, Charles J. Farrugia, Jesmond Mizzi.

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