Enterprise Inns Share Discussion Threads

[jeffian] 02/2/2011 17:01

No probs, o. A bit more detail on the bonds in the 2010 AR -

"Securitised and corporate bonds remain manageable, cost-effective and tax efficient

The £1,501 million of securitised bonds amortise over 21 years and currently attract a fixed rate of interest of 6.4%. The Group is £75 million ahead of the amortisation schedule and we expect to continue to make repayments of the floating rate notes in advance until they are repaid in full by 2012. The repayment of fixed rate notes commences in September 2013, at which time we expect dividend payments from the Unique subsidiary to cease as profits within Unique will be used to repay these notes.

The £1,185 million corporate bonds are non-amortising, are secured against ring-fenced portfolios of freehold pubs and attract a fixed rate of interest of 6.5% with the next scheduled maturities being £60 million in February 2014 and £600 million in March 2018. Whilst we will repay the £60 million 2014 bond from cash flow, we would expect to refinance the £600 million 2018 bond on maturity, bearing in mind that it will always be secured on a portfolio of pubs with an up-to-date valuation of £1 billion and interest cover of two times"

Total net debt at 30/9/10 was £3.3bn, so the difference of £600m-odd represents the bank debt which, as I said, they plan to get down to around £450m this year. They are feeling a bit sore that the market has pressurised them into paying down (cheap) bank debt when they could have been using the substantial cash sums they have generated to buy back bonds at a discounted rate giving them significantly better ROC! Mind you, I would have more sympathy with them if they hadn't spent £1bn buying in their own shares for cancellation at up to £7+ rather than paying down debt in earlier years!!!

[osirisra] 02/2/2011 12:34

Much appreciated Jeffian and agree about GNK news. Thanks again, very helpful (to more than just me I'm sure).

[jeffian] 31/1/2011 12:42

btw, there was some good news for ETI today in the GNK trading update. GNK's tenanted estate (the equivalent of the ETI business) has stabilised earnings and actually returned to modest EBITDA growth.

[osirisra] 31/1/2011 09:02

The prospect of rising interest rates could kille ETI off. Somebody remind me when the next huge chunk of debt needs refinancing? (please).
P.S. Not a deramper, I held and used to follow ETI closely but have drifted away over the past year or so.

[jeffian] 14/12/2010 00:24

Oh dear. My stalker.........

[the_doctor] 13/12/2010 18:06

Keep pumping jeffers
Try a company with real competitive advantage in a sector with positive dynamics

[jeffian] 13/12/2010 14:29

Interesting discussion on ft/alphaville this morning about Punch Taverns



There was talk in the press last week and over the w/e (big Sunday Times article) floating the idea that PUB may default on its securitised loans and let the tenanted estate revert to the bondholders, the Baldrick-style 'cunning plan' being that the bondholders (not being geared up to manage an estate of 5000 or so pubs) would have to ask PUB to run it for them.....on less onerous terms! Well - goes the gossip - there is an alternative; get ETI to do it for them! This would actually mirror the arrangement when ETI first bought Unique; as it couldn't actually afford the whole thing at the outset, Deutsche Bank bought it and ETI ran it until ETI could pay them off over a period. It's probably all hot air (imagine the squeals from the Competition boys!) but ETI shares seem to have enjoyed a bit of relative strength this morning!

[jeffian] 13/12/2010 10:57

Oh. It must have been a good year, then!

8-/

[nellie1973] 09/12/2010 09:15

Broker note out-BUY

[timbo003] 05/12/2010 15:07

I do not hold Punch (PUB), but I do hold Enterprise (ETI) and Marstons (MARS) and Green King (GNK), so I found this article in the Mail on Sunday a bit interesting!

[the_doctor] 01/12/2010 13:42

IMO this company is at risk of getting wiped out in the coming double dip


'generates cash and has paid down £374m of debt this last year'

jeffian conveniently leaves out the fact that £250m of that was from selling off assets

UK back into recession, or even just a fear of recession and:
- value of assets declines
- ability to sell anything off declines

The small amount of profit made, could easily be crushed if conditions deteriorate.
A 10% drop in revenue would half the company's cash flows.

[timbo003] 30/11/2010 08:32

This article is a couple of days old now, but it is an interesting read as it compares the business models for Enterprise and Punch

[cerrito] 25/11/2010 17:30

I thought the recent figures were rather good and like the debt reduction; bought more of the 2018 bonds which yield about 8.7%.
They are secured on a pool of pubs worth £1b.
They are also part of a shrinking universe of £ corporate bonds which trade in a minimum of £1k.
An investment I am comfortable with but not everyone's cup of tea I appreciate.

[jeffian] 24/11/2010 16:34

spob,

Since you found the time to pop back and fiddle with the header (making it too wide for my PC!), how about engaging in discussion about some of your wilder statements?

In addition to the 2 outstanding queries raised above, you might also explain why a company which makes profits, generates cash and has paid down £374m of debt this last year would suffer "total wipeout for equity holders" if it paid a dividend (e.g. a 5p divi covered over 5x by underlying eps would cost around £25m)? Besides affordability, since divis are a Revenue (P&L) item and shareholders' equity a Balance Sheet item, I'm struggling to see the connection. TIA.

[timbo003] 20/11/2010 03:20

Good idea, keep VAT at 20% (from Jan 2011) for Supermarket and off licence sales and reduce it to 12% for pub sales, whilst raising the duty on all beer so pub beer prices remain the same and supermarket beer becomes more expensive



net effect:

* The government raises a bit more tax to tackle the deficit
* It makes getting tanked up on booze before going to the pub more expensive (less drunks in town centres possibly?)
* Tramps will have to pay more for their special brew, so it will encourage them to drink less.
* Responsible drinkers will drink less at home and more in pubs.

Go for it!

[jeffian] 18/11/2010 12:44

jeffian - 21 Oct'10 - 10:15 - 408 of 416 edit


Ah, spob, as you're back on one of your rare visits, you forgot to answer this one -

"jeffian - 20 Jul'10 - 18:01 - 369 of 407 edit


Well what do you think is the "right" level of debt and why?

If you were buying a house (or pub!), how much of the purchase price would you be prepared to borrow?"


(P.S. Are you using the term "the banks" loosely in post 416, or do you think that ETI is reliant on bank debt? Most of their debt, of course, is in the form of long-term debentures or corporate bonds, the holders of which have no say in either dividends or early repayment of the loans, provided ETI live within their covenants. At the current rate of repayment they may have no bank debt at all within a few years.)

[spob] 17/11/2010 22:27

Dividends

Resumption of divis would just bring forth the inevitable for this doomed company - total wipeout for equity holders.


I'd be surprised if the banks allowed it - then again, nothing that the banks would do can shock/surprise me anymore.

Clearly the directors are either completely deluded, or acting in their own selfish interests.

[brownie69] 17/11/2010 09:56

Spot on Jazza, BOA/ML note today calls it a buy now for same reason. Presumably the reason for todays tick up?

[brownie69] 17/11/2010 09:37

Spot on Jazza, BOA/ML note today calls it a buy now for same reason. Presumably the reason for todays tick up?

[jazza] 17/11/2010 08:51

hmm, what fails to get a mention is that the debt gets paid down rapidly each year...unless the EV falls by a similar amount each year, the equity worth of the total EV would rise...or should do.

that's where "hidden" value lies i guess..

[timbo003] 16/11/2010 12:37

See comments on Enterprise and Punch on today's ftalphaville markets live:

[johnsoho] 16/11/2010 09:37

I think that in the current financial situation the country is in these results are pretty good and I very much like the following statement:

Commenting on the results, Ted Tuppen, Chief Executive said:

"We have delivered creditable results, hard won stability and genuine
operational improvements in difficult circumstances. The economic environment is set to remain challenging and we do not underestimate the impact of the
Government's austerity measures and fiscal tightening which will affect both our licensees and their customers.

However, the past year has demonstrated the resilience of the best pub operators in the industry and we believe that the profile of our estate, combined with the professionalism and flair of our licensees leaves us well placed to face whatever challenges the year ahead may bring. We remain confident that the business is in a sound position to deliver positive returns to shareholders over the medium term, including the resumption of dividend payments."

Hmmmmmm...so perhaps dividend payments will be restored within the next year to 18 months!!!!