Bondholders reject Punch restructure proposals

Despite this rejection Punch said that it continued to believe that “a consensual restructuring will be launched in the first half of 2013”. The c4,500-strong pub group is trying to restructure its £2.4bn of debt, which is held across two securitisations, Punch A and Punch B.
The Committee, which includes Legal & General and Aviva, said: “The Committee have, along with their advisors (Rothschild and Latham & Watkins), considered the proposals and their financial effects. Following this review, the Committee’s view is that the proposals do not provide a satisfactory solution for the capital structures of the Punch A and Punch B securitisations. The Committee would not support the current proposals put forward by Punch.”
The Committee said it had written to Punch setting out its detailed views on the proposal, and reasoning for those views.
It continued: “The Committee is prepared to work to reach a quick and efficient resolution. As a result it would welcome Punch and its advisors to work alongside the Committee’s financial and legal advisors (and those of other stakeholders) to develop revised proposals.
“In both Punch A and Punch B securitisations, an acceptable proposal will reflect the contractual entitlements of the parties, including (as applicable) the waterfalls and priorities of the existing notes. The amended terms of those notes which do not form part of the sustainable debt capacity should reflect their economic position in the capital structure.”
A Punch spokesman said: “Since the announcement by Punch on 7 February 2013 regarding its proposed restructuring solutions for the Punch A and B securitisations, the company has engaged extensively in constructive discussions with a broad range of stakeholders including the ABI Special Committee of Noteholders.
“As stated on 7 February, the Board has always been aware that there are a range of views on the restructuring proposals. The company welcomes the continuing dialogue with the ABI Special Committee of Noteholders and all other stakeholders around the current form of the proposals and firmly believes that it is the best interests of all parties to agree a consensual restructuring. While these discussions remain ongoing, the Board continues to believe that such a consensual restructuring will be launched in the first half of 2013.”
On 7 February, Punch announced "sufficient progress" had been made to enable the board to identify a restructuring solution for each securitisation "that it believes is in the interests of all stakeholders and is capable of being successfully implemented".
Punch said it would utilise cash resources at Group and within the Punch B securitisation to extinguish and cancel certain tranches of Punch B debt at a material discount to par; and amend financial covenants and defer amortisation in the Punch A securitisation, creating a platform for future deleveraging.
This would lead to a £463m reduction in contractual debt service payments over the next five years; a £393m targeted debt prepayment ahead of the new amortisation schedule over the next five years; and £229m immediate reduction in debt in the Punch B securitisation.
Punch said this would deliver value to stakeholders by creating a sustainable capital structure for a highly profitable pub business, which it highlighted delivered £250m of underlying operating profit and £312m of cash generation before debt service in the last financial year.
The move would also provide a platform on which to execute its business plan, including a £220m investment programme focused on the core estate and the disposal of £435m of non-core assets; and protect the material financial and operational benefits from which the two securitisations mutually benefit by being part of the wider Punch group.
Punch said the move was supported by "a broad group of stakeholders", and that it aimed to complete its restructuring process in the first part of the year.