Wolves refinances debts to bolster fire power

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The Independent Online

Wolverhampton & Dudley, the brewer and pubs operator, has become the latest pubs company to begin building up a war chest for acquisitions as consolidation fever takes hold of the sector.

The brewer announced a refinancing of its debt yesterday to bring it on to a lower interest rate, but it also secured a £250m additional bank facility that it will use for "general corporate purposes". Paul Inglett, the finance director, said: "The proposed refinancing of our existing debt will reduce interest costs and is consistent with our strategy of retaining the high-quality freehold asset base of the business, while providing greater flexibility for further development."

W&D wants to expand beyond its 2,000 pubs and is understood to be keen on buying some of Spirit Group's estate. The privately owned Spirit, which owns about 2,000 bars, is the subject of bidding speculation and an auction is poised to begin for its prized assets.

Punch Taverns, which runs about 8,000 pubs, has made an approach to Spirit about buying part of its £3bn estate, and last week the company led by Giles Thorley completed a refinancing of its debt that gave it additional financial firepower for acquisitions. Mitchells & Butler, the operator of the O'Neills and All Bar One chains, is also on the prowl for Spirit's assets.

Pubs operators have faced difficult trading conditions, particularly on the high street, and are looking to consolidate to boost market share and buying power. Greene King recently trumped W&D to take over the East Anglian brewer, Ridley. W&D recently bought the Lakeland brewer and pubs group, Jennings Brothers, as well as Burtonwood.

While Spirit is an obvious target for W&D, it is also likely to be interested in smaller, regional pubs groups, such as the Scottish group Belhaven, toboost its northern presence.

Shares in W&D closed up 1.5 per cent to 1,157p yesterday, as analysts expected the company to use some of its new financial resources on acquisitions.

Nigel Parson, an analyst at Williams de Broë, said: "Even if they keep £100m as a cushion, that leaves them with a chunky sum to pursue deals."