Despite the widely documented challenges faced by the U.K. pub industry - such as declining beer consumption, an increasing cost base and the upcoming smoking ban -companies are adapting to their environment enough to maintain levels of profitability. As a result, Fitch Ratings has affirmed all tranches of the 10 U.K. pub securitizations that it rates.

Fitch said that pub companies have maintained profitability since the consolidation between operators has resulted in economies of scale on the supply side, the enhancement of food and wine sales to offset the volume decline in beer sales and value-enhancing capital expenditure programs combined with the disposals of underperforming outlets. According to Fitch, 5,600 pubs changed hands in 2005 for a total value of GBP4.6 billion ($8.7 billion). And 2006 has also seen a number of transactions ranging from piecemeal disposals to large-scale acquisitions.

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