Punch warns of further restructuring delays
STAFFORDSHIRE pubco Punch Taverns has said a further delay in the implementation of its restructuring is likely after fresh terms were proposed by a group of stakeholders.
The company said it was unlikely the matter could be resolved until after June 30 and therefore a further extension to the covenant waivers for the Punch A and Punch B securitisations would be needed “to provide sufficient time to implement a consensual restructuring”.
The Punch board said it would provide further details of any extension in due course.
The company said the new proposals had been submitted by a group of creditors who together owned or controlled around 34% of the notes across Punch A and Punch B and over 50% of junior notes in both securitisations and the equity share capital of Punch.
In addition, Punch said that while the ABI Special Noteholder Committee had not agreed to the proposals, substantial progress had been made in addressing their issues.
Punch said any restructuring would require the consent of other parties outside of the stakeholder group, including shareholders, all classes of noteholders in Punch A and Punch B and other securitisation creditors. Accordingly, it said there could be no certainty that the proposals would proceed.
“A restructuring of the securitisations is required in order to avoid a default in both the Punch A and Punch B securitisations, which would be likely to have a material negative impact for all stakeholders,” said the company.
The proposals differ in a number of ways from the terms of the restructuring launched by Punch in January. In particular, junior notes in Punch A and Punch B would be exchanged for a combination of not only cash and new junior notes, but also ordinary shares in the company in a debt-for-equity swap. In addition, a group of junior creditors would subscribe for ordinary shares in the company at a significant discount to the current market price to raise additional funds to be applied to repay junior notes in the Punch A securitisation.
The proposals would result in a reduction in total net debt of £0.6bn.
“In consideration for the debt reduction, the debt-for-equity swap and placing contemplated by the proposals would result in significant equity dilution for existing shareholders, such that the company’s currently issued share capital would represent 15% of its total enlarged issued share capital following the restructuring,” it added.
Were the proposals to be implemented, the reduction in net debt would result in the pro-forma net debt to EBITDA leverage of the Punch group falling to c.7.7x that at August 2014. Gross securitisation debt of £1,582m would have an effective interest rate of c.7.9% including PIK interest.
“Any decision by the board to recommend a proposal involving dilution of existing shareholders would need to be carefully considered in terms of the value which it represents for existing shareholders,” said Punch in its statement.
