Moody's might cut Enterprise Inns notes to junk

Moody's Investors Service said it placed on review for possible downgrade Enterprise Inns plc's Ba2 corporate family rating, Ba3 probability-of-default rating and the Baa3 rating on its £275 million senior secured notes.

The rating action reflects the agency's concern that the prolonged and deepening malaise in the U.K. pub industry could place sufficient downward pressure on Enterprise Inns' beer sales and rental income, through increased concessions and tenant failure, to reduce EBITDA to the extent that interest coverage and leverage fall outside the agency's target credit metrics for maintaining the current ratings.

Moody's review will focus on the extent to which the operating environment for the pub industry will place pressure on the company's business fundamentals, what tangible corrective actions management is planning to take to reduce its leverage and improve interest coverage and the likely impact of the above on the company's credit metrics.

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