Corporate securitization: Pub opco propco has to wait as Globe opts for unusual whole business structure
The expected evolution of opco propco to the pub sector failed to materialize in May when Robert Tchenguiz’s Globe Pub Company opted for a whole business structure to fund the the ex-Spirit pub portfolio.
A new issuer in the UK public house market is a rare thing, but news that Globe Pub Company was to issue into the securitization market was particularly eagerly awaited. This is because the rumour mill had billed the deal as an opco propco – the European CMBS market’s structure du jour – and would mark a fundamental change in the way that value is extracted from pub assets. But it was not to be; when the deal emerged it was a good old-fashioned £257 million ($482 million) whole-business securitization – albeit one with some unusual structural twists.
Globe Pub Company was established in 2004 and so lacks the essential ingredient for a whole business deal: a strong operating history. This makes establishing run rate ebitda (the fundamental basis for the debt-service coverage ratio trigger) tough to establish. The deal, arranged by Barclays Capital, has circumvented the problem by taking the first-quarter 2006 ebitda and applying a seasonality index to extrapolate the annualized figure. This is all well and good, but the seasonality index is provided by Scottish & Newcastle Pub Enterprises (S&NPE), which itself has a 30-year management and brand supply contract with Globe.