Enterprise Inns shares up despite credit rating downgrade

Enterprise Inns' shares were trading strongly today despite the pubco's 'corporate family rating' being downgraded by Moody's, the US-based credit ratings agency.

Investors appeared to ignore news of the downgrade, pushing the pubco's shares up 3.6 per cent, against a FTSE All Share rise of 0.7 per cent, after the US-based agency said it was also lowering its rating for the pubco's 'probability of default rating' and that of its £275m senior secured floating-rate notes.

Other pubco stocks including Punch Taverns and Mitchells & Butlers rose, as positive news concerning UK jobs encouraged investors.

According to Moody's, a 'corporate family rating' is "an opinion of a corporate family's ability to honour all of its financial obligations".

Moody's said its downgrade reflected its expectations that Enterprise Inns' performance "is unlikely to improve sufficiently over the next 12 to 18 months to meet our target credit metrics for stabilising the rating at its former level".

The agency said it expected Enterprise to meet its financial commitments "and maintain an adequate liquidity profile over the next 12 months"; however it warned the pubco could run into problems trying to refinance its £1bn bank facility, due in May 2011.

Moody's acknowledged the majority of Enterprise's pubs had performed well, "given the market circumstances", but that a minority of its pubs faced considerable difficulties.

Enterprise, which has traditionally focused on its ability to service its debt rather than worry about its rating in the eyes of organisations such as Moody's, declined to comment.

The pubco is to sell and leaseback a further eight pubs through auctioneers Cushman & Wakefield, hoping in the process to raise more than £12m which would go towards paying off some of its debt.