130m pounds hangover for pub venture: Grand Met and Courage may inject cash to avoid breaching banking covenants

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GRAND METROPOLITAN and Courage may have to stump up pounds 65m each if their jointly owned Inntrepreneur pub company is to avoid breaching banking covenants.

Inntrepreneur was set up nearly five years ago in a pubs-for-breweries deal between Courage, the brewer owned by Fosters of Australia, and Grand Met, the international food and drinks group headed by Sir Allen Sheppard.

The pounds 130m injection is likely to take place in October and will come just a year after they both put in pounds 31m to stop a similar breach of the covenant, built around a loan-to-value ratio.

The ratio, agreed with about 80 banks, falls from 65 to 57.5 per cent at the end of September. Inntrepreneur's bank debts were pounds 1.2bn at the end of March, equal to 62 per cent of the pounds 1.93bn value placed on the 6,830 pubs.

Yesterday's disclosure, which accompanied Grand Met's better-than- expected pre-tax profits of pounds 416m for the six months to 31 March, drew a harsh response from the National Association of Inntrepreneur Lessees (Nail), which has been campaigning for lower rents.

A representative said: 'Nail, which consists of many hundreds of their supposedly 'simple-minded publicans', has been pointing out Inntrepreneur's problems all along.

'Harsh lease conditions have resulted in a vast number of bankruptcies and closures of public houses leased from Inntrepreneur.'

Besides the pending capital injection, the banks have also conceded that Inntrepreneur's conditional targets of having 20-year leases in place on 90 per cent of the pubs by next March cannot be met.

About 70 per cent of the pubs have been signed up on the 20-year leases, which would have meant Inntrepreneur converting another 1,400 pubs in the next 10 months.

A spokesman for Inntrepreneur disputed the claims by Nail. 'Rents are open to negotiation,' he said. 'Nail is a small minority, and the Inntrepreneur principle is sound. The vast majority of pubs in the estate are making a profit.'

Operating profits from Inntrepreneur fell from pounds 83m to pounds 79m in the half-year to March and interest charges of pounds 92m ( pounds 103m) left a taxable loss of pounds 12m ( pounds 14m).

The overall pre-tax result from Grand Met, which owns the IDV drinks company and the Burger King, Pillsbury and Green Giant food businesses, was a 5.6 per cent improvement on the corresponding period.

The food side lifted operating profits from pounds 124m to pounds 127m despite the adverse effects of last year's bumper harvest in the US on the Green Giant business.

Drinks contributed pounds 235m, up from pounds 268m, and retailing increased from pounds 61m to pounds 89m.

Earnings per share rose from 13p to 13.4p. The interim dividend is 5.1 per cent higher at 4.85p.

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