Moody's downgrades Punch A and B
Rating agency Moody's has downgraded Punch Taverns A and B securitisations. Moody's also said it expects like-for-like profits to stabilise in 2012 rather than 2011.
Geof Collyer of Deutsche Bank said: "The downgrade is no surprise, with Moody's saying that it expects the decline in like-for-like profits to stabilise in 2012 not 2011 (as do we).
"The surprise in the Moody's statement may be in the valuation of the pub portfolios within A&B, which Moody's now views as being worth £2.6bn — some 24% below the August 2010 book value of £3.4bn.
"Moody's has now reassessed the value of the pub assets as being equal to the levels of debt inside the structures, effectively wiping out any equity value.
"This view would probably accord with the equity market's, where any valuation of the tenanted & leased estates post demerger is likely to be just the value of the £130m of cash that is being left in the business to prevent securitisation default."
Collyer said he continues to see the Spirit managed arm of Punch to be "significantly overvalued", with estimates of its value at current equity of £1,289m, against a value of £2,391m using assets rather than equity.
"We know that the market is looking at Spirit as a turnaround story, but we view the table as highlighting the significant challenge that lies ahead, especially since the peer group multiples are 9.5x to 10.5x EBITA and 6.5x to 8x EBITDA for FY'11E."
