Pubcos to see London Town sites return

Speculation is rife that Punch Taverns and Enterprise Inns will be major victims of the pre-pack administration planned by London Town. 

The company tenants a host of Punch Taverns and Enterprise pubs through its management arm GRS Inns — it has 24 Punch leases and 14 Enterprise leases in its managed division as well as a number of pubs where it is providing temporary management.

It is thought that GRS Inns will be left behind in the administration meaning sites will revert to Punch and Enterprise for re-letting. 

An industry source said: "Many of the Enterprise and Punch pubs will be profitable at the unit level and be run by the administrator for a while pending their sale or assignment."

Accountants PricewaterhouseCoopers (PwC) has been lined up to oversee the pre-pack — London Town operates more than 400 managed and tenanted pubs.

It is thought that PwC's David Chubb will lead the process when the group is officially placed through an administration process, which is expected to happen either later this week or early next week.

Shares in London Town are due to cease trading on Aim at the end of today's session amid separate plans to delist it from the London's junior stock market.

The group, which is led by Billy Buchanan, specialises in running lower-end tenanted and leased pubs, and also working with other groups to turnaround failed or failing outlets.

It claimed to have reopened 125 pubs in the six months to March 2009. The group started life as a commercial property developer before making its first foray in the pub sector with the acquisition of 167 pubs from Jack Petchey for £94.7m.

The deal was funded through a £72.8m loan with Anglo Irish Bank, a £14m discounted bond issue and a £14.3m share placing.

Breached covenants​

At the time of the deal, the Petchey package was thought to be producing underlying profits of under £7m.

Last June the company revealed losses had doubled to £24.7m in the year to December 28, 2008 and that it had breached covenants on its £83.7m bank loans. At the time it said it was in talks with lenders over the terms of its banking facilities.

Net debt at the year end stood at £110.8m, which included three short-term working capital loans.

In September, when the company issued interim results, its said it was still in discussions with its lenders.

Last year Buchanan spoke of the advantage that being a tenant of Punch and Enterprise provided for its own tenants: "We have been putting in place significant support for tenants where it is needed.

"As tenants of Enterprise and Punch, we know what they're offering and not offering tenants — we've been very proactive.

"(Being tenants of Punch and Enterprise) is another good reason why we're a good company to be with (for our tenants) as we see both sides of the equation.

"This gives us a good understanding of the pressures being faced by tenants.

"We see Retail Price Index (RPI) rent increases going on (in our pubco leases) every year.

"Some of our leases allow us to increase rent by RPI for our tenants. "We always do that if the lease allows it, but we will consider the increase and other factors when considering what help we need to give to some of our tenants."