October 2006
Pub securitization: Real estate pushes pubs through single-A ceiling
Higher underlying ratings will change the economics of the pub securitization market.
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| Cheers! M&B’s new paper got a triple-A rating on its underlyings from Fitch |
UK pub group Mitchells & Butlers (M&B) tapped its 2003 managed pub securitization in mid-September. The structure of the deal itself was unremarkable – the issuer simply replaced its outstanding floating rate notes with £620 million equivalent of new paper – but what was significant was the rating. This is the first time that the underlying rating on a UK pub securitization has topped single-A. The underlyings were rated double-A by Standard & Poor’s (S&P) and reached triple-A with Fitch.
This is good news for the pubs and bad news for the monolines.
The fact that an underlying pub portfolio can reach triple-A on its own is a sign of a change in rating agencies’ attitude towards this asset class and moves taken by M&B to strengthen the secured pool.
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