Globe pub estate sees £200m writedown

Globe Pub Company, the 421-strong tenanted pub company run by Scottish & Newcastle Pub Enterprises, saw an impairment charge of £199.1m in the value of its pubs in the year to 31 May 2008.

The estate decreased in value to just £160m when accounts were signed in July 2009 — meaning each pub is currently worth around £380,000.

Robert Tchenguiz paid £345m to buy 364 pubs from Spirit in December 2004, a value per pub of £947,000.

The estate saw a major further deterioration in performance in its most recent quarter to 31 August. The rent roll decreased by £800,000 to £11.1m in the quarter.

Pubs let on substantive leases dropped from 258 to 237 during the quarter and there were a further 14 rent concessions, a "notable increase from last".

A spokesman for Globe said: "This is reflective of current market conditions and a clear indication of the increased level of support we are offering to our lessees during this time.

"Additional methods of support were also employed during the quarter including beer discounts, contributions towards utility costs and increasing the machine share in favour of the tenant."

Globe has breached the covenants attached to its securitisation and is unable to spend any development capital.

The company said: "The continued inability to access capital severely impacted upon the estate profile during the quarter and it is becoming increasingly difficult to re-open closed pubs and prevent further ones failing whilst such restrictions remain." Year-on-year drinks revenue was down 8% in the quarter and year-to-date — a "reflection of further decline in consumer confidence in recent months".

The ratio of Ebitda to debt service for the two financial quarters ended 31 August was 1.10 versus a covenant level of 1.25. The ratio of free cash flow to debt service for the two financial quarters ended 31 August is 1.07 versus a covenant level of 1.10.

An independent consultant, Deloitte, has drawn up a report on Globe, as is required when covenants are breached — it is being considered.