Debt reduction good/debt reduction bad
Credit rating agency Standard & Poor's (S&P's) rather rained on Punch Taverns' parade last week when it revealed it was putting some of the pubco's bonds onto what it called 'CreditWatch negative'.
Following Merrill Lynch's earlier 'buy' recommendations on Punch Taverns, as well as a number of other pub operators, one could be forgiven for thinking the worm had turned. Those sceptical of the broker's line were quick to a) boggle at the assumptions for the sector and b) gleefully point to share prices sliding back after an initial flurry of the good vibes.
S&P's argument is that trading will remain subdued throughout 2010, with consumer demand "inhibited" by the pot pourri of issues with which we are all (depressingly) familiar.
It also argued - and here you hands over your money and you takes your choice - that while it viewed debt reduction via asset disposals as a positive, there remained the fear that the pubco's cashflow could prove unpredictable if "a significant percentage of the assets or the strongest assets are sold".
The financial stability of the country's large pub owners continues to be a hot topic for many. Barely a week goes by but that someone isn't suggesting that this or that pubco behemoth is about to go the way of the Great Auk.
Such speculation - mischievous or otherwise - has tongues wagging and while far-fetched, for now at any rate, merely adds to the sense that what is visible is less the end of the tunnel, more a train coming the other way…
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WaverleyTBS's announcement that around 200 jobs are likely to go across its logistics and telesales operations is another sign that the drinks industry is feeling the pinch. I trust the company will see the affected people right. But who will be next?
