Analysts defend pub FD caught in hedging nightmare

Analysts defend pub FD caught in hedging nightmare

Harvester and All Bar One FD receives City support despite news of huge hedging loss

Former FD Karim Naffah

Analysts have defended former
Mitchells
& Butlers
finance director Karim Naffah, who left the company this week
following a £270m hedging calamity.

KBC Peel Hunt analyst Paul Hickman said: ‘The company thought it was acting
in the best interests of shareholders. If the deal went ahead, a Real Estate
Investment Trust would have been set up, which would have generated a lot of
cash for shareholders.’

Karim Naffah, who has been FD since 2003, fell on his sword after the pub
operator – owners of All Bar One and the Harvester chain – disclosed the massive
loss on the back of a property deal with tycoon Robert Tchenguiz imploding.

M&B entered into interest rate swaps and other financial derivative deals
aimed at protecting it from fluctuations in interest rates and inflation.

But after the credit crunch, M&B was left holding the hedges, but not
pursuing the deal. It booked a £155m charge in its 2006/07 year and said this
week that it would take a further £119m post-tax hit this year.

None of M&B’s seven executive directors, including Naffah, will receive a
bonus for 2007 as a result.

Deputy FD Jeremy Townsend will now assume control of M&B’s finances.

This morning reports in the press suggested M&B could now be subject to
takeover bids from rivals, including Punch Taverns. M&B is now estimated to
be valued at £1.9bn after a steep rise in the company’s share price.

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