Punch tenants still worried about their pubs' futures

By Ellie Bothwell

- Last updated on GMT

Related tags: Punch taverns, Punch tenants, Contract

Ex-tenant Ron Piper said Punch needs to look at 'restructuring the relationship with their partners'
Ex-tenant Ron Piper said Punch needs to look at 'restructuring the relationship with their partners'
Punch tenants are still concerned about the future of their pubs, despite bondholders last week voting in favour of the pubco’s restructuring proposals.

Licensees told the Publican’s Morning Advertiser​ they welcomed the “short-term” certainty, but questioned whether the Government’s statutory code will impact how the pub company can repay its debts.

Last week [27 June] Punch Taverns announced the influential ABI Special Committee was among “a broad range of stakeholders” which now supported the company’s proposals.

It means about 60% of bondholders are now signed up against a 75% requirement in each tranche of debt. The agreement is subject to the restructuring being launched by 11 August.

It brings an end to three and a half years of negotiations, but tenants said they feared it is “not really the end”.

Profit aspirations

Chris Lindesay, of the Sun Inn in Dunsfold, Surrey, co-ordinated a network of Punch tenants earlier this year to communicate and share advice amid the uncertainty.

He said: “It is still a company in £600m of debt and paying 7.9% interest. I don’t think this is the end of it. I think it’s the best they can negotiate at the moment”.

He added: “If the Government is truly going to make tied tenants no worse off than free-of-tie, then there will be a gap between that and Punch’s aspirations for the profit they will need to pay off this new level of debt.”

Ron Piper, who ran the Sir John Barleycorn in Hitchin, Hertfordshire for 11 years before being evicted last month, agreed: “When the statutory code comes in it will have a massive effect on revenue. I don’t see how they can keep trading. I expect in a year or two we’ll be in exactly the same position we were in eight or nine years ago.”

Restructuring relationships

Piper had written to Punch chairman Stephen Billingham asking him to grant a waiver on the £23,000 debt incurred during his time at the pub.
“It’s all very well restructuring their finance. They need to restructure the relationship with their ‘partners’,” he added.

Carol Ross, of the Roscoe Head in Liverpool, said: “It beggars belief how they have survived, while owing that much money. They’re only going to squeeze tenants even further because they still have to survive.”

Andy Slee, central operations director for Punch Taverns, said: "Last week’s announcement was a big step towards securing the long term future of Punch Taverns, although there is still a lot of work in front of us.

"Punch Partners on substantive agreements are in many ways the most secure of all our stakeholders as they are protected by their legal agreement. That said, we accept that there has been uncertainty created in recent months and have posted regular  updates and answered many queries via www.punchbuyingclub.com​ which reaches 90% of our estate.

"Day-to-day, things remain very much 'business as usual'. Our investment programme and initiatives like roadshows and our New Business team continue apace with the aim of helping our partners succeed. After all, if they do well then so do we.”

Related topics: Punch Pubs & Co

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Punch Debt

Posted by Breffni Consulting,

It won't be £600m of debt, it will be £600m less than now - so about £1.6bn. But this is a company that is paying the interest on £2.2bn currently so they will be in a much better position post-restructure. The company will be in a pretty good position and as many of us have always said, tenants won't be worse off, shareholders will (including me). Whilst it wasn't Stephen Billingham's idea or choice, a debt for equity swap was always going to be required (see my post in May last year suggesting this).

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Violin music on the Titanic

Posted by David,

If a company flirts with defaulting on its debts, is the root cause that the interest rate is a point or two higher than ideal - or might it be the sheer size of its debt as a function of its earnings?

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Not £600 million debt

Posted by Paul C,

I think Chris Lindesay has been misquoted here. I am sure he is very well aware that the debt has NOT been reduced TO £600M, but BY £600M. That will leave Punch still in debt to the utterly outrageous tune of £1.7B, which of course means that the remaining lessees will continue to be in the horrendous position of having to service that debt. It is extremely doubtful that the profit margin required to that end can be extracted from the estate as things stand currently, which means it will be a sure-fire impossibility if the regulation comes into force and works as it should ("no worse of than FOT").
And this is not even to mention the possibility of an amendment to the bill successfully introducing the MRO option. Sadly this stay of execution on Punch (if successfully achieved) simply means that the carnage in the tied sector will continue and accelerate, while Punch get busy with the extra time they will have been granted to strip-mine the rest of the pubs they own.

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