Punch still confident of restructuring consent but warns default looms large
STAFFORDSHIRE pubco Punch Taverns has said it hopes to reach a consensual agreement to its long-running and often controversial restructuring plan.
The company said earlier this month that it was delaying the implementation of the capital restructuring to allow it more time to talk to stakeholders. It had stated earlier that the business faced a crucial period in its history and unless the restructuring was agreed then there was a possibility it could default in the near term.
It was due to put the plan forward at a meeting on February 14 but opted to delay that so it could hold more talks with stakeholders.
In an interim trading update, the company said: “The board remains of the view that a consensual restructuring is in the best interests of all stakeholders.”
It adds: “Underlying trading for the half year is expected to be broadly in line with management expectations and consequently, while we cannot predict with certainty what the DSCR (Debt Service Cover Ratio) level will be, we anticipate that one or both securitisations will fail their respective DSCR financial covenants with respect to the covenant testing date of March 1, 2014 when they are next tested and reported on April 15, 2014.”
It warned that in the absence of a consensual restructuring, failure to achieve Q2 DSCR financial covenant in the relevant securitisation would, on April 15, result in a default in the relevant securitisation within a further 30 days.
“Moreover, failure to effect a restructuring in the near-term will lead to a default in both the Punch A and Punch B securitisation, which is expected to have a material negative impact on the business, including material dissynergies and disruption to the business,” it added.
It said it was therefore vital that in the interests of all parties, an agreement was reached on the restructuring before the April 15 deadline.
Stephen Billingham, executive chairman of Punch Taverns, said: “We are convinced that a consensual restructuring is by far the best outcome for all stakeholders, and we will continue to work with all stakeholders to reach a consensus on the restructuring. No-one can be in any doubt about the consequences of failing to agree a consensual deal.
“We call on all parties to work together constructively to agree a restructuring. Everyone has something to gain by agreeing a restructuring that will retain the material financial synergies and provide certainty and stability for the business from which all stakeholders will benefit.”
The company said interim trading had continued in line with management expectations with core estate like-for-like net income for the half year expected to be broadly in line with the 1.5% growth reported for the first 20 weeks to January 4, 2014.
Management expectations for the full year remain unchanged with the core estate expected to deliver like-for-like net income growth of up to 1%. The pub investment and non-core pub disposal programmes remain on track with full year capital investment expected to be around £45m and disposal proceeds anticipated to be around £100m.
