Punch shares up as it starts to repay debt

Shares in Punch Taverns, the embattled pub group, have this morning jumped 30% after it announced plans to repay a tranch of debt to some of its bondholders, according to M&C Report​.

The group is to repay £90m of debt held within one of Punch's securitisations, known as "Punch A", allaying cashflow concerns and fears it may breach certain conditions attached to the "A" financing structure.

The shares spiked up 41.25p to 176.25p on the back of the announcement, before coming back down to 161p - a rise on the day of 19.2%.

Some analysts suggested that the move was designed to alleviate pressure on repayments to bondholders, as there had been fears that Punch would breach a debt service-cover ratio condition in Punch A.

This stated that if the cash flowing through the debt structure dips below 1.5 times the levels required to service the interest on the debt, it would automatically lock down until the situation had been rectified.

This would mean that any spare cash from the 5,000 pubs held within Punch A would not have flowed through to Punch Taverns, starving the listed holding company of cash.

The interest cover at Punch A had fallen to 1.51 times, prompting Punch Taverns to scrap its dividend.

A statement from Punch said "the purpose of its proposal was to more efficiently manage its existing cash resources".

It is offering to repay 95% of value of the £93.5m the bonds are worth.

According to analysts, debt held within Punch's securitisations has been exchanging hands on the open debt market for as little as 70% of its value, in recent weeks.