Punch Taverns Board has announced that it has completed a detailed review of the Group’s capital structure and, though discussions are ongoing, it has identified a restructuring solution that it believes is in the interests of all stakeholders and is capable of being successfully implemented.
To date, reactions appear to have been largely favourable. However, support has still to be obtained from a number of stakeholders in order to implement the ‘solution’.
Stephen Billingham, Executive Chairman of Punch Taverns plc, commented
“Following extensive stakeholder discussions, we are now able to set out the key terms of restructuring proposals that we believe will deliver value to all stakeholders and can be successfully implemented. Importantly, these proposals already have the support of a significant group of stakeholders. The Board is mindful that support is also required from a large number of other stakeholders and the Board is keen to engage with all stakeholders and commence implementation of the restructuring proposals without delay.”
Highlights
Restructuring solutions identified for each securitisation
• 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.
Achieves a material reduction in debt and debt service
• £463 million reduction in contractual debt service payments over the next five years;
• £393 million targeted debt prepayment ahead of the new amortisation schedule over the next five years; and
• £229 million immediate reduction in debt in the Punch B securitisation.
Delivers value to all stakeholders including:
• Creates a sustainable capital structure for a highly profitable pub business which delivered £225 million of underlying operating profit and £312 million of cash generation before debt service in the last financial year;
• Provides a platform on which to execute the business plan, including a £220 million investment programme focused on the core estate and the disposal of £435 million of non-core assets; and
• Protects the material financial and operational benefits from which the two securitisations mutually benefit by being part of the wider Punch group.
Supported by a broad group of stakeholders
• A group of five financial institutions, consisting of Glenview Capital, Octavian, Luxor Capital, Alchemy and Avenue Capital, who together manage funds that hold over 50% of the Group’s issued share capital, c.25% of the Punch B debt in total and a majority of the total junior debt in Punch B and the trustees of the Punch B defined benefit pension scheme;
• Monoline insurers, Ambac and MBIA who between them guarantee c.£990 million of notes across the two securitisations, including over 50% of the Punch A notes, and whose approval of the proposed restructurings is required;
• In addition, the Board has already commenced discussions with a number of other stakeholders including swap counterparties, liquidity facility providers and other holders of debt in the two securitisations; and
• Punch will now engage with all stakeholders to seek additional support to implement the proposed restructuring solutions as soon as possible, while keeping the provision of financial support to the Punch A and Punch B securitisations under review.