A leading sector analyst has said that the way is clear for Enterprise Inns to refinance its bank debt, now that the downsizing of its estate was under control, and upgraded the group from a hold to a buy.
Paul Hickman of Peel Hunt said: “Enterprise should be able to refinance bank debt at c£350m, well ahead of the expiry of the current facility in December 2013, and at the same time renegotiate the key 6.5x bank debt: Ebitda covenant for a limited period. That would affect the pricing, but this is unlikely to be material – we would estimate a maximum of 50bps, which would amount to c£2m.
“We recently met the FD and he expects bank debt to run at sub-£400m in FY2012 (down from £900m in FY2009).”
The group last revalued its estate in September and wrote down values by 2%.
The analyst said that Enterprise sold 579 pubs in FY2010, 212 in H1, and expects to sell 500 in the full year.
He said: “Management believes that it is getting to the end of disposing of the tail. This should allow the disposal rate to slow and enable management to get value for subsequent disposals.
“Average net income per pub was flat at the interims. LFL net income was down 2%, but this included more poorly performing pubs that are still being divested.”
Shares in Enterprise increased 2.7% yesterday on the back of the note to 67.5p.
