Punch Taverns has announced that its latest restructure proposals have been agreed by “a broad range of stakeholders” including the influential ABI Special Committee.
The agreement is subject to the restructuring being launched by 11 August.
However, the pub company warned that implementation of a consensual restructuring still requires the consent of other parties outside of the stakeholder group, including shareholders, all classes of noteholders in Punch A and Punch B and other securitisation creditors. “Accordingly, there can be no certainty that the proposals will be successfully implemented.”
The agreement will also require a further extension of covenant waivers which were approved by noteholders on 13 May.
Stephen Billingham, executive chairman of Punch Taverns, commented: ”We view the current situation as very positive and that a successful restructuring can be implemented. Continued constructive dialogue and determination from all involved will be required to achieve this.”
In a statement issued this afternoon, Punch said: “Each institution in the stakeholder group has undertaken to support the proposals and to vote its holdings of equity shares and/or notes in favour of resolutions required to implement a restructuring. These undertakings are subject to certain milestones being met, including that a restructuring is launched and documentation regarding the proposals sent to shareholders and noteholders by 11 August 2014.
The stakeholder group comprises the ABI Special Committee together with a number of individual funds or subsidiaries of such funds advised or managed by Alchemy Special Opportunities LLP, Avenue Europe International Management LP, Angelo, Gordon & Co LP, Glenview Capital Management LLC, Luxor Capital Group LP, Oaktree Capital Management LP, Seer Capital Management LP and Warwick Capital Partners LLP.
The stakeholder group represents institutions who in aggregate own or control c.59% of the notes across Punch A and Punch B, c.54% of the senior notes across Punch A and Punch B, c.62% of the junior notes across Punch A and Punch B and c.54% of the equity share capital of Punch.
Robert Hingley, director of investment affairs at ABI, said: “Today’s announcement represents the culmination of three and a half years of tireless efforts by the ABI Special Committee of Punch Taverns and its advisers to ensure that the rights of bondholders were upheld and that an equitable and lasting solution could be achieved.
“The agreement, which is the result of intense negotiations in recent months between the ABI and Punch Tavern’s other key creditors, will see Punch Taverns emerge with a sustainable capital structure.”
The restructure proposals would result in a reduction in total net debt (including the mark-to-market on interest rate swaps) of £0.6bn. In consideration for the debt reduction, the debt-for-equity swap and placing contemplated by the proposals would result in significant equity dilution for existing shareholders, such that the company’s currently issued share capital would represent 15% of its total enlarged issued share capital following the restructuring.
Were the proposals to be implemented, the reduction in net debt would, according to Punch, “result in a sustainable capital structure for the group with the pro-forma net debt to EBITDA leverage falling to c.7.6x at transaction close. Gross securitisation debt of £1,564m would have an initial effective interest rate of c.7.9% including PIK interest (c.7.1% cash pay interest)”.
Meanwhile, Punch has issued an interim third-quarter management statement for the 16 weeks to 21 June showing like-for-like net income in the core estate up 1.4%, equalling the company’s performance in the first half of the year.
The company claimed it remains “on track to meet full year profit expectations”, adding that “the disposal programme remains on track to deliver at least £100m of net proceeds for the full year” and that its “strong investment pipeline in core pubs continues”, with an average spend of approximately £100,000 per invested pub.
