Enterprise Inns plc Annual Report and Accounts 2012

Notes to the Accounts
at 30 September 2012
23. Financial assets and liabilities (continued)
The security pledged for the Group’s debt is summarised below:
Debt Instrument
Security
Bank borrowings
– 1st floating charge over the balance of pubs in the Parent Company not already
secured by a 1st fixed charge created by the corporate bonds.
– 2nd floating charge over the pubs secured by a 1st fixed charge created by the
corporate bonds.
– Share pledge over Unique Pubs Limited.
Corporate bonds
– 1st fixed charge over the 2,132 pubs in the parent company valued by GVA
Grimley Limited (see note 17).
– 2nd floating charge over the balance of pubs in the Parent Company.
Securitised bonds
– Collectively over the whole Securitisation; the security incorporates a 1st fixed
charge in favour of the Trustee over the Issuer’s right, title, interest and benefit,
present and future to all properties, cash, eligible investments and income
generated by Unique Pub Properties Limited.
Covenants
The Group is subject to a number of covenants in relation to its borrowing facilities. There are four covenants
that relate to the bank borrowings, which are tested quarterly. There are two leverage covenants and two asset
valuation covenants. There is sufficient headroom on all four of these covenants.
There are two covenants that relate to the corporate bonds; an asset value covenant and a net annual income
covenant. At the year end there is an annual valuation of the pub estate and a review of the annual income for the
pubs secured under each of the corporate bonds. The valuation is undertaken by a firm of independent chartered
surveyors. The directors certify the net annual income as part of an annual compliance exercise. In the event
that pub values or pub incomes have fallen, there may be a requirement to add more pubs to the security of
the corporate bonds and any addition of new pubs must be completed within 90 days of the year end. There is
sufficient headroom on both of these covenants.
Annual Report 2011 2012 Our Accounts
There are two covenants that relate to the securitised bonds which are tested at each quarter end. These covenants
are based solely on the assets held within the securitised bonds and comprise a net asset covenant and a debt
service cover covenant. There is sufficient headroom in both of these covenants.
The Group tests all of the above covenants on a regular basis and forecasts are prepared during the budgeting
process. These are reviewed at Board level.
Hierarchical classification of financial instruments measured at fair value
IFRS 7 requires that for fair value measurements recognised in the Balance Sheet the inputs used in the valuation
are graded using a prescribed hierarchy as described below:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Other techniques whereby the inputs are either directly or indirectly derived from market data.
Level 3 – Inputs used in the valuation are not based on observable market data.
At September 2011 the Group had 3 interest rate swaps which were recognised in the Balance Sheet at fair value.
The inputs used in the valuation were evaluated as level 2 within the hierarchy described above.
The fair values disclosed in respect of corporate bonds and securitised bonds have been evaluated as level 1 within
the hierarchy described above.
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