PRESSURE is mounting on Punch Taverns after it emerged that almost one in five of its tenanted public houses is looking for a new licensee.

The pub group’s shares have fallen in recent weeks because of fears over the sustainability of its business model.

Many pub tenants are suffering from a combination of increased competition from supermarkets selling cheap alcohol, the smoking ban, rises in duty and a general decline in beer drinking. This has prompted some analysts to question whether landlords, including big pub companies such as Punch and Enterprise Inns, are charging too much in rent. Tenanted or leased pub companies make the bulk of their income from charging tenants rent and for beer.

A research note published this month by analysts at Morgan Stanley, the investment bank that is one of the joint brokers to Punch, said: “The leased-pub business model [is] being sorely tested.”

Punch has 7,560 leased pubs in its estate, spread across the UK. But almost 1,400 of these, around 18% of the portfolio, are looking for new tenants. West Yorkshire has more pubs available for potential new tenants than any other part of the country.

Just over 1,000 of the pubs Punch has available in the UK are being offered by the company. The remainder are tenants who are looking to pass their leases to a new licensee.

Punch said that out of its entire leased estate, just 220 of the sites are closed. Those being advertised, it said, are made up of sites with tenants looking to quit the business and those occupied by so-called “tenants at will” - managers who look after pubs on a daily or weekly contract, sometimes without having to pay rent.

A small number, about 50, are pubs that were in Spirit, Punch’s managed-house arm, that are to be converted to tenanted sites.

Giles Thorley, chief executive of Punch, said there had been no recent deterioration in the number of pubs available and dismissed fears that there would be a problem finding new tenants.

“There are plenty of people looking to get into pubs,” he said. “We leased more than 800 pubs in the year to August and we did 100 in August alone.”

Thorley also dismissed fears that the company would struggle to find the cash it needs to redeem a £295m convertible bond that is due by December 2010. “I am not concerned by it at all,” he said.

Investors don’t share management’s optimism; in the past year shares in the group have fallen by 83.5%. They closed on Friday at 162Äp, giving the company a market value of £432.5m. At its 12-month peak in October the group was worth almost £3 billion. Punch has net debt of £4.7 billion. Earlier this month the group announced that it would cut its final dividend.

In its note Morgan Stanley said: “The annual dividend only consumes £40m-£50m of cash, so the fact that Punch needs to save this amount implies that headroom is already pretty tight.”

Punch admits that the market is getting tougher and has said it is having to do more to help hard-up tenants.

In a trading update on September 3, the group announced that the level of rent concessions it pays out had risen to £6m, but said that this represented less than 3% of its total rental income.

The situation at Punch is made more complex by its financial structure. Most of its income does not go to the parent company but is used to pay interest on bonds raised by Punch several years ago.

While the pub market was thriving there was plenty of extra cash available for investment and to pay back to shareholders as dividends. In this tougher economic climate Punch’s first priority is to ensure there is enough money to service its debt.

Thorley said that the current crisis in the money markets would not affect the company as it does not hold straight bank debt. Its borrowings are in the form of long-term bonds.

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