GMB calls for Punch debt-for-equity swap

The GMB trade union has called on Punch Taverns boss Ian Dyson to kick off debt-for-equity swap talks with the pubco's bondholders.

The union said it was making the call to Punch's recently appointed boss after it had commissioned what it called a "detailed study by outside experts" of the group's published accounts and the securitised vehicles within it.

The GMB, an arch critic of the tied pub sector, claims that 92 per cent of Punch's assets are not owned by its shareholders but are in fact tied up in three securitisation vehicles: Punch A, Punch B and Spirit.

It says these securitised vehicles are 'cash-trapped' - meaning income from them cannot be upstreamed to the plc to pay dividends and the like - and Punch would be better off looking at "converting its £3.5bn of debt into equity to ensure a more viable pub business".

The GMB meanwhile said it had calculated that the debts per pub averaged out at £534,901.

"The interest payment alone averages £36,373 per year per pub. There are also huge costs of derivative financial instruments linked to the debts which amount to an average of £62,000 per pub in 2010. Total financing costs are on average £98,554 per pub per annum or £271 per day per pub."

Paul Maloney, the GMB's national officer for GMB tied tenants, said: "This analysis of the Punch published accounts leads GMB to conclude that Ian Dyson needs to follow the example of MGM and begin discussions with the bondholders to convert debts to equity to secure a viable future for Punch.

"I cannot honestly say that I understand all the intricacies of the accounts but I do understand the mountains of debt and amount of red ink in the accounts of a company set up by debt junkies.

"The debts average £534,901 per pub and interest payment and costs linked to the loans amounts to an average of £271 per day per pub and is payable whether the pub is trading at a profit or not."

Investors have been aware of the cash-trapped status of the securitised vehicles for some time and according to City sources a debt-for-equity swap is not the only option available to Dyson.

One analyst recently went so far as to say the pubco could get tough, turning round to some of its bondholders and offering them the pubs against which the debt has been securitised if they won't renegotiate the terms of the bonds issued.

Punch was unavailable for comment.