Beer: Reliable, Liquid, Securitizable

Article excerpt

What is a glass at the local pub worth? That's one of the questions that had British bankers involved in pub securitization deals scratching their heads recently. Four major deals in pub securitization, worth more than 1 billion ($ 1.6 billion), have been concluded since last year, and there are indications that further agreements are forthcoming.

Securitization deals may be common in the United States, but the British pub arrangements are pioneering-they rely not only on hard assets such as real estate but on the number of pints that a pub can sell.

The last deal finalized was a 3305 million securitization for Pubmaster in June. The deal was partly based on the calculation that each of the group's 1,485 securitized drinking establishments would sell about 210 barrels of beer a year.

The Pubmaster deal follows those undertaken in Britain bv Unique Pubs, Punch Taverns, and Wellington Pub.All the deals have involved investment-grade issuance at ratings between AAA and BBB, and all except Wellington have included the securitization of beer revenue.

Unique is the largest deal, raising L375 million, compared with Punch's L275 million, Wellington's L211 million, and Pubmaster's 180 million. The Punch, Unique, and Pubmaster are all single-A and triple-B, whereas Wellington is mainly AAA and securitizes only rental revenue. Unique has the largest estate outside securitization, with 2,715 pubs. Punch has 2,1 j 1, Pubmaster 2,147, and Wellington 843. So how do the banks work out a pub's profitability? By barrellage. This is the average number of barrels of beer, each containing 288 pints, sold by the pub a year. The higher a pub's barrellage, the greater its purchasing power over the brewers and therefore the cheaper its beer. Unique has the best purchasing power in the industry because its beer comes from its sister company, Supplyline. Both companies are owned by Japanese bank Nomura. …