Pubco Punch launches capital restructuring to prevent risk of default
STAFFORDSHIRE pubco Punch Taverns is to implement its complicated debt restructuring strategy to prevent the business from having to default in the near term.
The company announced this morning it was launching the capital restructuring of its A and B securitisations. The move follows a 14-month review of the business structure and discussions with stakeholders.
Punch said the purpose of the discussions had been to reach an agreement on the terms of a consensual restructuring for both securitisations.
“The board remains clear that a restructuring of the securitisations is required in order to create a sustainable capital structure. Failure to implement a consensual restructuring is expected to lead to a default in the relevant securitisation in the near-term,” it said.
It said if the scenario played out then the securitisation cash resources used to facilitate the restructuring would be severely depleted with the mandatory repayment of £188m of available cash to Class A notes at par and the loss of the £52m group cash contribution.
The company said the proposed terms of the restructuring were in the best interests of all stakeholders and would deliver material benefits to all stakeholders.
The benefits include the creation of a robust and sustainable debt structure; the preservation of the group structure and a better position for stakeholders than default. Noteholders will be asked to vote on the restructuring on February 14.
It added that while the potential implications of a default could not be accurately predicted, any default was likely to have a negative impact on the business leading to disposals, administration costs and a reduction in estate values. Investment potential would also be severely reduced and cash flow restricted.
Stephen Billingham, executive chairman of Punch Taverns, added: “We believe that the restructuring is in the interests of all stakeholders and delivers a materially better position than the alternative of a default.
“The restructuring will create a robust debt structure which will provide certainty and stability for the business. It will also provide a solid platform to allow Punch to build on the recent improvement in the group’s trading and preserve the material synergies of running the two securitisations as part of the same group. Stakeholders will be able to benefit from the improvements to the business we are putting in place.”
In a trading update for the 20 weeks to January 4, 2014 the company said like-for-like net income in the core estate was up 1.5% and there was growth in average net income per pub across the entire estate.
Management expectations for the business remain unchanged with the expectation of the core estate, which is set to deliver like-for-like net income growth for the current financial year of up to 1%.
It said the pub investment and non-core pub disposal programmes remained on track with full year capital investment expected to be around £45m, with income generated from the sale of non-core pub expected to around £100m.
