How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance - Feb. 8, 2021 - S&P Global
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How The Geographic Footprints Of U.K. Pub
Corporate Securitizations May Influence Their
Performance
Feb. 8, 2021
CONTACTS
Greg M Koniowka
London
+44-20 -7176-1209
greg.koniowka@spglobal.com
spglobal.com/ratingsdirect
How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance
How The Geographic Footprints Of U.K.
Pub Corporate Securitizations May
Influence Their Performance
Key Takeaways
− The U.K. government’s lockdown restrictions to mitigate the effect of the COVID-19
pandemic are heavily curtailing the operations of the pub estates backing U.K. pub
corporate securitizations.
− The pub estates have different geographic footprints and, should the regional tiering
system be imposed once the national lockdown ends, their exposure to regional
restrictions will differ.
− The overall risk to each pub estate’s trading performance will be shaped by its geographic
footprint, the regional progression of the coronavirus cases across the U.K., and the
consequent restrictions put in place by the U.K. government.
In this report, S&P Global Ratings presents some key data that may be useful in assessing the exposure to
increased lockdowns of each U.K. pub corporate securitization that we rate. The data focuses on the
location of pubs within the pub estate backing each transaction, which is generally not the whole of each
parent company’s pub estate. The overall risk to each pub estate’s trading performance will be shaped
by its geographic footprint, the regional progression of coronavirus cases across the U.K., and the
consequent restrictions put in place by the U.K. government, as currently dictated by a nationwide
lockdown in England.
Geographic Footprint
In terms of exposure to Greater London (comprising Inner and Outer London), Mitchells & Butlers
Finance PLC, Spirit Issuer PLC, and Unique Pub Finance Co. PLC (The) have far greater exposure than
Marston’s Issuer PLC and Greene King Finance PLC, with Marston’s having just one pub in Outer London
and none in Inner London. Spirit, albeit with a relatively small estate, has the highest exposure to Greater
London, followed closely by Mitchells & Butlers, with both having over 10% of their estates within Inner
London.
Mitchells & Butlers has the most diversified geographic footprint, while Marston’s is the least diversified,
with approximately 56% of its pubs spread across the East and West Midlands, with additional pockets in
the North West, Yorkshire, and the Humber.
Greene King’s estate is heavily centered in the south east and the east of England, with another
concentration in Scotland. At the end of November 2020, with the introduction of the U.K. government’s
first version of its tiering system, Greene King’s concentration gave it some distance from the Midlands
hotspots and those areas facing the most stringent restrictions, with Marston’s being the most exposed
to local restrictions that hampered their ability to trade. However, the landscape has shifted quickly, and
it is now the south east that is exhibiting the highest levels of new cases, with Greene King replacing
Marston’s as the most exposed. As regional coronavirus hotspots continue to flare up and dissipate,
there could be further reversals of fortune.
spglobal.com/ratingsdirect Feb. 8, 2021 2
How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance
In terms of population center concentration, which is an indicator of the availability of outside space that
helps to lessen the impact of restrictions on both social distancing requirements and bans on standing
and drinking indoors, over a third of Marston’s estate is situated in a rural setting, compared with around
14% for Mitchells & Butlers and Spirit, 20% for Unique, and 25% for Greene King.
Chart 1
Regional Distributions
35
Mitchells & Butlers
30 Spirit
25 Unique
% of total estate
Marston's
20
Greene King
15
10
5
0
Inner Outer South South East of East West North North Yorkshire Scotland Wales
London London East West England Midlands Midlands East West and The
Humber
Source: S&P Global Ratings.
Copyright © 2021 by Standard & Poor's Financial Services LLC. All rights reserved
Chart 2
Population Center Distributions (Urban/Rural)
90
Mitchells & Butlers
80
Spirit
70
Unique
60
% of total estate
50 Marston's
40 Greene King
30
20
10
0
Urban Rural Urban Small town Rural
England/Wales Scotland
Source: S&P Global Ratings.
Copyright © 2021 by Standard & Poor's Financial Services LLC. All rights reserved
spglobal.com/ratingsdirect Feb. 8, 2021 3
How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance
Chart 3
Population Center Distributions (Detail)
50
Mitchells & Butlers
45
Spirit
40
Unique
35
% of total estate
Marston's
30
Greene King
25
20
15
10
5
0
Urban Urban Urban Rural Rural Rural Rural Large Other Accessible Remote Accessible Remote Very
major minor city town village hamlet village urban urban small small rural rural remote
and and isolated sparse area area town town rural
town fringe setting
England/Wales Scotland
Source: S&P Global Ratings.
Copyright © 2021 by Standard & Poor's Financial Services LLC. All rights reserved
Coronavirus Progression
The following set of maps show the geographic footprint of each pub company on the current (Jan. 24,
2021) coronavirus landscape in the U.K., represented by the rolling seven-day new cases figure. (As
reported by specimen date, divided by an area’s population and multiplying by 100,000, or the cases per
100,000) We chose a level of detail that represents the 2019 local authority districts in the U.K., which
closely aligns with the Lower Tier Local Authority area type used in U.K. government’s coronavirus
dashboard. Following adjustments made by the U.K. government when presenting its data, the
coronavirus case data for City of London and Isles of Scilly are combined with Hackney and Cornwall
respectively. Likewise, we mapped any pubs located in the City of London to Hackney, to form a
combined entity, Hackney and the City of London. All coronavirus data is as of Jan. 24, 2021.
spglobal.com/ratingsdirect Feb. 8, 2021 4
How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance Chart 4 Geographic Footprint With U.K. Coronavirus Landscape Source: S&P Global Ratings. Copyright © 2021 by Standard & Poor's Financial Services LLC. All rights reserved spglobal.com/ratingsdirect Feb. 8, 2021 5
How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance Chart 5 Mitchells & Butlers’s Geographic Footprint With U.K. Coronavirus Landscape Source: S&P Global Ratings. Copyright © 2021 by Standard & Poor's Financial Services LLC. All rights reserved spglobal.com/ratingsdirect Feb. 8, 2021 6
How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance Chart 6 Green King’s Geographic Footprint With U.K. Coronavirus Landscape Source: S&P Global Ratings. Copyright © 2021 by Standard & Poor's Financial Services LLC. All rights reserved spglobal.com/ratingsdirect Feb. 8, 2021 7
How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance Chart 7 Marston's Geographic Footprint With U.K. Coronavirus Landscape Source: S&P Global Ratings. Copyright © 2021 by Standard & Poor's Financial Services LLC. All rights reserved spglobal.com/ratingsdirect Feb. 8, 2021 8
How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance Chart 8 Spirit’s Geographic Footprint With U.K. Coronavirus Landscape Source: S&P Global Ratings. Copyright © 2021 by Standard & Poor's Financial Services LLC. All rights reserved spglobal.com/ratingsdirect Feb. 8, 2021 9
How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance Chart 9 Unique’s Geographic Footprint With U.K. Coronavirus Landscape Source: S&P Global Ratings. Copyright © 2021 by Standard & Poor's Financial Services LLC. All rights reserved The U.K. Government's Responses Following the end of a four-week lockdown in England, on Dec. 2, 2020 the U.K. government implemented a new tiering system replacing a local COVID-19 alert level, or tiering system, whereby each local area in England was assigned a local COVID-19 tier of "medium," "high," or "very high," based on the level of infections for that area. The recommendations and rules for the tiering system and the framework for determining which tier is assigned to which area were governed by the U.K. government’s COVID-19 Winter Plan. On Dec. 20, 2020, the U.K. government expanded its tiering system to include a fourth tier, tier 4, which was a stay at home order. Pubs fall within the hospitality sector and are, therefore, subject to the restrictions applied to hospitality businesses within each tier. Tier 1: Medium alert − Provide table service only. − Stop taking orders after 10 p.m. − Close between 11 p.m. and 5 a.m. spglobal.com/ratingsdirect Feb. 8, 2021 10
How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance
− Continue selling food and drink for consumption off the premises after 10 p.m. as long as this
is through delivery service, click-and-collect, or drive-through.
Tier 2: high alert
− Close, unless operating as a restaurant, only serving alcohol with substantial meals.
− Stop taking orders after 10 p.m.
− Close between 11 p.m. and 5 a.m.
− Continue selling food and drink for consumption off the premises after 10 p.m. as long as this is
through delivery service, click-and-collect, or drive through.
Tier 3: Very high alert
− Closed with the exception of takeaway, click-and-collect, drive-through, or delivery services.
Tier 4: Stay at home
− Closed with the exception of takeaway, click-and-collect, drive-through, or delivery services.
In its COVID-19 Winter Plan, published in November, the U.K. government listed five key epidemiological
indicators that will contributed to decisions on which area goes into which tier, which include case
detection rates in all age groups and the rate at which cases are rising or falling, both of which are
leading indicators for the pressure on the NHS, another of the factors considered. The table below shows
a relationship between the seven-day rolling rate of new specimen cases reported for each local authority
district and its tier as of Jan. 4, 2021, the day before the tiering system was withdrawn and supplanted by
a nationwide lockdown with stay at home restriction.
Table 1
Distribution of Local Authority districts amongst Tiers in England (%)
As of January 4, 2020
7-day rolling rate of new specimen cases per
100,000 2014 2015 2016 2017 Total
10.1-50 0.0 0.0 0.0 0.0 0.0
50.1-100 0.0 0.0 1.0 0.3 1.3
100.1-150 0.0 0.0 2.5 0.6 3.2
150.1-200 0.0 0.0 1.6 2.5 4.1
200.1-250 0.0 0.0 5.1 10.8 15.9
250.1-400 0.0 0.0 4.4 44.1 48.6
400.1+ 0.0 0.0 1.0 26.0 27.0
Total 0.0 0.0 15.6 84.4 100.0
When it was introduced, the tiering system was intended to be in effect until the end of March 2021.
However, England went into a full nationwide lockdown on Jan. 5, 2021 and is expected to remain in
lockdown for at least six weeks. The current restrictions on pub operators are the same as those put in
place under tiers 3 and 4, with pubs ordered to close with the exception of providing takeaway for food
and non-alcoholic drinks and delivery of food and drink (including alcohol) until 11 p.m.
We expect that new restrictions will continue to be introduced at the regional and local level when the
U.K. government lifts the current national lockdown and, we assume, reverts to some form of tiering
system. Taking the epidemiological indicators of case detection rates and the rate at which cases are
rising or falling as an indicator of which tier a region may be assigned post lockdown, the chart below
spglobal.com/ratingsdirect Feb. 8, 2021 11How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance
shows the exposure of each pub company to regional differences of each indicator. When the seven-day
rolling rate of new specimen cases and its rate of change are combined, the differences in the geographic
footprints between the pub companies begin to reveal their relevance. Each pub company’s estate is
exposed to the general trend throughout the U.K. in the number of new cases, which have been falling
over the last week. However, the differences in their geographic footprints discussed above show that
those with greater exposure to regions with adverse epidemiological indicators may face greater
restrictions under a new tiering system. The distributions in table 2 show that Marston’s had the least
number of pubs in regions that were under tier 4 restrictions in early January, but seem to be in regions
where the rate of decline is more muted than, say, either Mitchells & Butlers or Greene King. If this trend
holds, it may suggest that Marston’s pub estate may face tougher restrictions than the other pub
companies.
Chart 10
Pubco Presence Within The Landscape Of Coronavirus Cases
Source: S&P Global Ratings.
Copyright © 2021 by Standard & Poor's Financial Services LLC. All rights reserved
Table 2
Distribution Of Pubco Estates Among Tiers In England (%)
On Jan. 4, 2020
England
Constituent
Country of Great
Issuer Britain Scotland/Wales Tier 1 Tier 2 Tier 3 Tier 4
England 0.0 0.0 0.0 9.9 78.9
Greene King Finance PLC Scotland 10.3 0.0 0.0 0.0 0.0
Wales 0.9 0.0 0.0 0.0 0.0
Greene King Finance PLC
11.3 0.0 0.0 9.9 78.9
Total
Marston's Issuer PLC England 0.0 0.0 0.0 28.2 63.4
spglobal.com/ratingsdirect Feb. 8, 2021 12How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance
Wales 8.4 0.0 0.0 0.0 0.0
Marston's Issuer PLC
8.4 0.0 0.0 28.2 63.4
Total
England 0.0 0.0 0.0 16.4 75.8
Mitchells & Butlers
Scotland 4.4 0.0 0.0 0.0 0.0
Finance PLC
Wales 3.4 0.0 0.0 0.0 0.0
Mitchells & Butlers
7.8 0.0 0.0 16.4 75.8
Finance PLC Total
England 0.0 0.0 0.0 13.6 80.0
Spirit Issuer PLC Scotland 5.4 0.0 0.0 0.0 0.0
Wales 0.9 0.0 0.0 0.0 0.0
Spirit Issuer PLC Total 6.3 0.0 0.0 13.6 80.0
England 0.0 0.0 0.0 30.5 65.9
Unique Pub Finance Co.
PLC (The)
Wales 3.5 0.0 0.0 0.0 0.0
Unique Pub Finance Co.
3.5 0.0 0.0 30.5 65.9
PLC (The) Total
Given the current uncertainties surrounding the path the COVID-19 pandemic will take in the U.K., the
prospects of and timing for a vaccine against the virus, and the U.K. government’s response, the situation
remains quite fluid.
We will continue to monitor the regional progression of COVID-19 within the U.K. and evaluate the
potential effects from U.K government restrictions on the expected size and duration of reductions in the
securitized transactions' net cash flows. Against the backdrop of those developments, we continuously
evaluate whether adjustments to our base-case and downside projections are appropriate. Changes in
our projections could adversely affect our debt service coverage estimates, which, in turn, could put
pressure on our ratings. If longer-term effects emerge that reshape the economy or industry, we may
revise our assessment of a company's business risk profile, which could also result in rating changes.
Our ratings on 14 classes of notes from four U.K. pub corporate securitizations are currently on
CreditWatch negative. The CreditWatch placements reflects the ongoing significant uncertainty
surrounding the timing and robustness of the COVID-19 recovery and each issuer’s available liquidity.
Table 3
U.K. Pub Corporate Securitizations On CreditWatch Negative
Class Rating
Issuer
Marston's Issuer PLC A2 BB+ (sf)/Watch Neg
Marston's Issuer PLC A3 BB+ (sf)/Watch Neg
spglobal.com/ratingsdirect Feb. 8, 2021 13How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance
Marston's Issuer PLC A4 BB+ (sf)/Watch Neg
Marston's Issuer PLC B B+ (sf)/Watch Neg
Greene King Finance PLC B1 BB+ (sf)/Watch Neg
Greene King Finance PLC B2 BB+ (sf)/Watch Neg
Unique Pub Finance Co. PLC (The) A4 BB+ (sf)/Watch Neg
Unique Pub Finance Co. PLC (The) M B (sf)/Watch Neg
Unique Pub Finance Co. PLC (The) N B- (sf)/Watch Neg
Mitchells & Butlers Finance PLC B1 BB (sf)/Watch Neg
Mitchells & Butlers Finance PLC B2 BB (sf)/Watch Neg
Mitchells & Butlers Finance PLC C1 B+ (sf)/Watch Neg
Mitchells & Butlers Finance PLC C2 B+ (sf)/Watch Neg
Mitchells & Butlers Finance PLC D1 B+ (sf)/Watch Neg
As vaccine rollouts in several countries continue, S&P Global Ratings believes there remains a high
degree of uncertainty about the evolution of the coronavirus pandemic and its economic effects.
Widespread immunization, which certain countries might achieve by midyear, will help pave the way for
a return to more normal levels of social and economic activity. We use this assumption about vaccine
timing in assessing the economic and credit implications associated with the pandemic (see our research
here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and
estimates accordingly.
Related Research
• Greene King Finance Class A And AB U.K. Corporate Securitization Ratings Affirmed, Class B Notes On
CreditWatch Negative, Dec. 22, 2020
• The Unique Pub Finance Co. PLC Class A, M, And N U.K. Corporate Securitization Notes Kept On
CreditWatch Negative, Dec. 18, 2020
• Credit Conditions Europe: Waiting For Relief, Dec. 3, 2020.
• The Eurozone Can Still Rebound In 2021 After Lighter Lockdowns, Dec. 1, 2020
• U.K. Pub Corporate Securitizations Ratings Remain On CreditWatch With Continued Uncertainty As
Winter Approaches, Oct. 22, 2020
• SLIDES: EMEA Retail & Restaurants: Industry Overview, Credit Trends, And Outlook, Oct. 16, 2020
• Q3 European Economic Snapshots Indicate A Second COVID-19 Wave Is Dampening The Recovery,
Oct. 14, 2020
• Mitchells & Butlers Class A And AB U.K. Corporate Securitization Notes Ratings Affirmed, Oct. 12,
2020, July 21, 2020
• Various Rating Actions Taken On Marston's Issuer's U.K. Corporate Securitization Notes, July 15,
2020
• Various Rating Actions Taken On Greene King Finance Corporate Securitization Notes, July 14, 2020
• Rating Affirmed On Spirit Issuer Corporate Securitization Notes, July 14, 2020
spglobal.com/ratingsdirect Feb. 8, 2021 14How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance
• Unique Pub Finance Co. PLC Class M And N U.K. Corporate Securitization Notes Ratings Lowered,
July 7, 2020
• Various Rating Actions Taken On Mitchells & Butlers U.K. Corporate Securitization Notes, June 25,
2020
• 34 Tranches On Seven U.K. Corporate Securitizations Placed On CreditWatch Negative Due To
COVID-19 Uncertainty, April 17, 2020
• European Corporate Securitizations: Assessing The Credit Effects Of COVID-19, March 26, 2020
• Coronavirus Dramatically Increases Risk For Already Stressed Retail And Restaurant Sectors, March
20, 2020
Attributions
• Contains Ordnance Survey data © Crown copyright and database right 2020
• Contains Royal Mail data © Royal Mail copyright and database right 2020
• Contains Public Health England data © Crown copyright and database right 2020
• Office for National Statistics licensed under the Open Government Licence v.3.0
spglobal.com/ratingsdirect Feb. 8, 2021 15How The Geographic Footprints Of U.K. Pub Corporate Securitizations May Influence Their Performance Copyright © 2021 by Standard & Poor’s Financial Services LLC. All rights reserved. No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription) and www.spcapitaliq.com (subscription) and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. STANDARD & POOR'S, S&P and RATINGSDIRECT are registered trademarks of Standard & Poor's Financial Services LLC. spglobal.com/ratingsdirect Feb. 8, 2021 16
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