London-based Nightcap bags €11.7M debt financing from HSBC; plans UK expansion

London-based Nightcap, a company that acquires and organically grows drinks-led businesses, announced on Wednesday, August 17, that it has raised £10M (approximately €11.78M) in a debt financing round facilitated by HSBC, a multinational universal bank and financial services holding company.

The debt facility is divided into two tranches – a £7M (nearly €8.25M) revolving credit facility and a term loan for £3M (nearly €3.53M) with a three-year repayment period. 

The company’s current cash position (including cash in transit) is £6.1M (nearly €7.19M).

Capital utilisation

Nightcap says the funds will help it to consolidate its existing debt facilities, totalling £5.5M (nearly €6.48M), across its businesses. The remaining £4.5M (nearly €5.3M) under the new HSBC financing arrangement will be used to make capital investments in its new sites as it seeks to expand its presence in prominent areas of London and other UK cities.

Nightcap has 22 other properties under offer or in legal talks across the company’s brands, in addition to the 31 open venues and the three locations nearing completion of their fit-out.

Sarah Willingham, CEO of Nightcap, says, “When we listed Nightcap on AIM and embarked on a company and new site acquisition programme last year, we knew that we would want to consolidate our debt facilities with the right banking partner. The £10M debt facility will support our growth plans for the coming years as we make good on our mission for Nightcap to become the UK’s leading cocktail bar group.”

What is Nightcap?

Nightcap looks to capitalise on the opportunity to build a major drinks-led hospitality group. The company currently owns The Cocktail Club, the Adventure Bar Group and the Barrio Familia group of bars. Its aim is to acquire, recapitalise and develop drinks-led concepts with significant potential across the UK. 

According to Nightcap, there have been fundamental changes in the hospitality sector and in customer preferences. Large portions of the hospitality industry have been struggling as a result of high capital costs, high rents, discount offers, rising food prices, and a move toward home delivery – all of which have been hastened by Covid-19. Millennials, in particular, are moving away from mid-market hospitality chains in favour of experience-driven, quality nights out at distinctive, local-style venues.

Such factors have increased the number of available sites, decreased rents, site premiums, and capital expenditure, and increased the availability of skilled hospitality workers in the labour market. This is where Nightcap looks to operate. The company is focused on easy-to-replicate scalable business models with nationwide rollout potential.

The company believes that in the coming years, drinks-led business models that target a millennial audience will have an “exceptional” opportunity to thrive alongside reduced competition, given their low operational break-even levels, uncomplicated business models and high return on capital.