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UPDATE 2-UK's M&B explores capital raise as new lockdown shuts pubs again

* M&B exploring an equity capital raise

* New lockdown shuts its pubs and restaurants

* Q1 sales plunge 67.1%

* Shares fall around 8% (Adds shares, analyst comments)

Jan 7 (Reuters) - Mitchells & Butlers said on Thursday it may need to raise fresh funds as it deals with a new coronavirus lockdown that has shut the British pub operator’s sites again after a sharp fall in important holiday quarter sales.

Shares in the owner of All Bar One and Toby Carvery pubs and restaurants were 7.9% lower at 219.5 pence by 0926 GMT.

M&B, which has already cut 1,300 roles to reduce costs, said its board unanimously supported an equity capital raise, although a decision has not yet been made on the timing, size or terms.

Following some local restrictions on hospitality in the run up to Christmas, England went into a new nationwide lockdown earlier this week as it struggles to curb surging COVID-19 cases and a new variant of the virus.

Chief Executive Officer Phil Urban said the government’s Job Retention Scheme was temporarily protecting some employment “but there is a real and pressing need for support for businesses themselves if we are to return to being the vibrant sector and important employers that we were”.

Urban’s call for the government to “better understand” the impact of the restrictions on the sector echoes the frustrations expressed by the likes of Wetherspoon’s and Marston’s .

Stifel analyst Mark Irvine-Fortescue said he believed the board would want to have sufficient liquidity to protect against at least two quarters of limited revenue.

“This suggests a potential capital raise in the region of £215m.”

Peel Hunt analysts meanwhile estimated M&B’s net debt had increased from 1.56 billion pounds to 1.71 billion pounds in the first-quarter.

Sales plunged 67.1% in the 14 weeks ended Jan. 2, as ever-tightening restrictions across UK and Germany significantly reduced sales through the festive trading season.

The company said it had a monthly cash burn of 35 million pounds ($47.52 million) to 40 million pounds before a 50 million pound debt service payment per quarter. ($1 = 0.7366 pounds) (Reporting by Tanishaa Nadkar in Bengaluru, Editing by Sherry Jacob-Phillips, Kirsten Donovan)

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