Wellington Pub Company, the 829-strong free-of-tie pub company — owned by the Reuben brothers, but subject to a securitisation — has seen a 2.6% decline in Ebitda.
According to a Fitch report published last month, that decline was made up of rental income excluding property disposals, in the year to the end of June 2009, compared to the year before.
Criterion Asset Management, which runs the estate on behalf of Wellington, has indicated that the amounts provisioned for bad debt have substantially increased, as have costs linked with recoveries of unpaid debt, repossessions and void properties.
The proportion of rental collections via direct debit also continued to drop to a low of 43% for the quarter ending August 2009 against historical averages of 65% to 70% — a "clear signal that more of Wellington's tenants are struggling to meet rental payments on time".
The lease renewal process remains a major area of concern for Fitch, as a significant portion of the portfolio is due for renewal over the next three years.
Wellington continues to experience a shortage of experienced and financially-strong tenants looking to enter substantive agreements for pubs, and as a result around 7% of the estate is not currently let on long leaseholds.
Fitch ratings downgraded Wellington's fixed rates notes, assigning them a negative outlook having placed them on a slightly higher footing — "rating watch negative" — in March this year.
The negative outlook points to potential further declines faced by Wellington given "the uncertainties for the wider UK economy".
Fitch noted that Wellington's securitisation does not benefit from a financial default covenant, a "structural weakness compared with other wholesale business securitisation transactions".