The proposals include:
- Modifying Spens protection on all senior notes for any prepayments ahead of the amortisation schedules;
- Increasing PIK coupons on junior notes;
- Strengthening operational covenants;
- Appointing senior noteholder appointed as independent observers to the boards of the borrower companies in each securitisation.
Punch said it believes the proposed terms of the restructuring “are in the best interests of all stakeholders and will deliver material benefits to them”, including creating a robust and sustainable debt structure, preserving the group structure for the continuing benefit of all stakeholders; and delivering a materially better position for all stakeholders than default.
The company stated: “The restructuring proposals are final. Failure to effect a restructuring is expected to lead to default in the near-term at which point securitisation cash resources (used to facilitate the restructuring) are expected to be severely depleted with the mandatory prepayment of £188m of available cash to Class A notes at par and loss of the £52m group cash contribution.”
A meeting of noteholders is due to take place on 14 February.
Punch also this morning reported a trading update, saying that like-for-like net income in the core estate was up 1.5% in the 20 weeks to 4 January. Assisted by weak weather comparatives, it delivered growth in average net income per pub across its entire estate.
“Management expectations for the group remain unchanged with the expectation for the core estate to deliver like-for-like net income growth for the current financial year of up to 1%. The pub investment and non-core pub disposal programmes remain on track with full year capital investment expected to be c£45m and disposal proceeds, raised largely from the disposal of non-core pubs, anticipated to be c£100m.”
'Robust debt structure'
Stephen Billingham, executive chairman of Punch Taverns, said: “I am pleased to announce formally today the launch of the restructuring of Punch’s securitisation structures, representing the culmination of 14 months of extensive stakeholder engagement. We believe that the Restructuring is in the interests of all stakeholders and delivers a materially better position than the alternative of a default.
“The restructuring will create a robust debt structure which will provide certainty and stability for the business. It will also provide a solid platform to allow Punch to build on the recent improvement in the group’s trading and preserve the material synergies of running the two securitisations as part of the same group. Stakeholders will be able to benefit from the improvements to the business we are putting in place.
“We want all stakeholders to consider the proposals carefully and thoroughly. We will continue to be available to answer any questions. It is the view of the board that the benefits of approving the restructuring are clear and of benefit to all stakeholders. However, failure to do so will lead to a much worse outcome with considerable uncertainty for the business and potentially significant loss of value.”