An update on discussions between Punch Taverns and its bondholders will be eagerly awaited next week when the pub group updates on first quarter trading, as they are crucial to the company’s future, according to a leading analyst.
Geof Collyer at Deutsche Bank, said that with the new chairman Stephen Billingham having been in place for a few months and the ex-Punch Taverns chief executive Ian Dyson now just concerned with the group as a non-exec, there should be more “management time being devoted to achieving a suitable outcome for all parties”.
He said: “Although we see the bond holders having the stronger negotiating corner, Punch still has cash resources at the plc level, which for now, can support both securitisations and upstream cash back to the plc. As long as Punch can do this, bondholders cannot force it to the table to talk.
“This year, we forecast that Punch will have to increase the direct cash support by around one-third, so the group's ability to stave off talks cannot go on indefinitely. In any case, it is in all stakeholders' interests to conclude restructuring discussions as soon as practicable so that the business can get back onto an even keel.”
Collyer said that current trading should be “reasonable”, though he does not expect – assuming a flat economy - that Punch will get back to level lfl net income until H2'12E at the earliest.
In regards to disposals, Collyer said: “We are forecasting an 8% drop in pubs trading this year, so any comment about absolute performance should be informed by this issue.
“We do not know the phasing of these disposals, though the market is getting concerned about the ability of individuals and small businesses to fund the other side of the transactions - something that may become more problematic if the disposal of RBS's remaining tenanted and leased pub assets (Galaxy) to Heineken signals a broader desire on behalf of the bank to exit this asset class from any angle.”
