Our banking covenants are safe, says Enterprise Inns boss
As the market continues to debate the issue of pubco debt, the boss of Enterprise Inns' claimed its banking covenants remain unaffected by recent ratings downgrades.
In a trading statement, in which chief executive Ted Tuppen noted there had been "no material change" in Enterprise's trading since January's interim management statement, he said none of the downgrades affecting the group had "implications for the business in terms of covenants and of costs to the business".
Tuppen added that Enterprise was confident that "adequate banking facilities will be available at the appropriate time and, in the meantime, we have in place a sensible plan for debt reduction over the next two years and will continue to review all options in the debt markets".
Enterprise has a bank syndicated facility of £1bn which is due for renewal in May 2011.
On the group's trading, Tuppen said January was "relatively strong, February was hit by two weeks of bad weather and March has been steady".
It was the quality of its pub estate, "the inherent fairness of our business model and the expertise of the majority of our licensees that underpins our estate".
"The majority of our pubs continue to trade remarkably well. However we recognise that some licensees, despite their best efforts, are struggling in the current circumstances and we continue to provide financial support of some £1.4m a month through special price discounts and rent concessions where appropriate," he added.
Enterprise said it completed sales of 150 pubs for £44m, "slightly ahead of book value".
Enterprise's share rose more than 10 per cent in early trading to 62.5p following the statement, though not everyone was impressed.
Alex Paterson of stockbrokers Liberum Capital said he didn't believe Enterprise would be able to generate sufficient cashflow "internally or through disposals" to pay the £1bn/2014 facility down in full.
"We fear that Enterprise may have a similar experience to [bookmakers] William Hill with less than the full facility being available going forward despite Enterprise's comments that it believes adequate facilities will be available.
"For the long term we continue to see the leased and tenanted model as challenged with many pubs over-rented, fierce price competition from supermarkets and limited ability to offer a competitive food service in many pubs," he added.
