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Punch lands a blow for acquisition finance

Securitizing whole companies may be seen as the future of securitization in Europe, but so far only a few examples of this technique have taken place – and most of them have been in the UK pub industry. What is it about UK drinking dens that makes them so suitable for securitization?

  Securitizing whole companies may be seen as the future of securitization in Europe, but so far only a few examples of this technique have taken place – and most of them have been in the UK pub industry. What is it about UK drinking dens that makes them so suitable for securitization?

The answer is not just that pubs have steady and predictable cash flows – increasingly coming from food as well as the traditional staple of beer – it is also because the industry has gone through profound corporate restructuring in the past 10 years since the government forced brewing companies to sell a proportion of their retail outlets. Now, after a series of acquisitions and buy-outs, much of the cash taken through an average UK pub till is earmarked for bond investors.

One of the latest big pub sales took place last August when Allied Domecq disposed of its pub and off-licence business for £2.75 billion.

The buyer was Punch Taverns, a company that had already bought a number of other estates. The acquisition was Financed initially by a £1.5 billion bridge loan syndicated by Morgan Stanley. However, when it came to refinancing the deal in the securitization market, Punch turned to Salomon Smith Barney.

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