Punch Taverns confident over debt restructure

Punch Taverns is confident it can complete a debt restructure in the first half of this year, according to finance director Steve Dando.

The company has set out a proposed restructuring process that would reduce company debt by £463m over the next five years and said it wants to begin implementing it “without delay”. A number of Punch bondholders have already agreed to accept cash and new bonds at a discount to the par value of their investments.

Dando confirmed that in order for the restructure to take place, all bondholders would need to be on board.

He said: “There is some urgency. We’re keen to put the business on a sound financial footing. We spent the best part of 15 months on getting to where we are today. We think we have on the table a proposition that can be delivered.”

Dando said there’s still “a lot of work to be done” and admitted that some would “grumble” about the proposal.

Punch has revealed that a number of alternative options to the restructuring proposal were considered, including pre-pack administrative receivership of one or both of Punch’s securitisations.

Meanwhile, Punch has said that, since its trading update on 14 December, market conditions have “remained challenging”, although average profit per pub is “broadly stable” and overall profit performance is “in line with management expectations”.

“The group currently expects to generate underlying EBITDA of between £210m and £220m in the current financial year after incurring c£30m of central and unallocated costs. Approximately 80% of pub EBITDA is expected to be generated from the core estate, with the remaining 20% being generated from the non-core estate.

“Management currently expects that the core estate will return to a growth of between 0% and 1% in the next financial year as volume declines are offset by improving margins and rental income, driven in part by the impact of the capital expenditure programme which upgrades approximately 15% of the estate each year. The core estate is expected to deliver like-for-like growth in net income of between 1% and 2% in the 2015 financial year before returning to a long-term growth rate of c.2% in the 2016 financial year.”

Punch expects to sell between 370 and 400 non-core pubs in the current financial year. As at 8 December 2012 there were 429 non-core pubs on the market for disposal with a book value of £111m, leaving a further 1,087 non-core pubs with a book value of £324 million to be sold over the remaining five years of the programme.

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