East Anglia: Punch Taverns boss urges creditors to agree a deal to avert default
11:10 28 February 2014
Pub owner Punch Taverns today repeated its warning that it faces the prospect of default unless creditors agree to a restructuring of its debt.
Earlier this month, the group called off a vote on its latest proposals amid continued objections from bondholders, and agreed to a fresh round of consulation − a process it began more than a year ago.
But in a trading update today, Punch said failure to achieve a “consensual restructuring” was expected to result in it failing to meet the next round of tests on its securitised debt, with default likely to follow.
The group said in a statement: “As announced on February 12, 2014, Punch has extended the period of engagement with stakeholders and the board remains of the view that a consensual restructuring is in the best interests of all stakeholders.”
It added: “In the absence of a consensual restructuring, failure to achieve the second quarter DSCR (Debt Service Cover Ratio) financial covenant in the relevant securitisation when reported on April 15, 2014 would result in a default in the relevant securitisation within a further 30 days.
“Moreover, failure to effect a restructuring in the near-term will lead to a default in both the Punch A and Punch B securitisation, which is expected to have a material negative impact on the business, including material dissynergies and disruption to the business.
“As a result, it is in the interests of all parties to agree a consensual restructuring ahead of the next covenant reporting date of April 15, 2014, and to put in place a sustainable long-term capital structure for the securitisations.”
Punch is Britain’s second biggest pub owner with around 4,000 leased and tenanted properties, including many in East Anglia where, as a result of mergers and acquistions, it includes a number of former Tolly Cobbold pubs.
In its trading update, for the first 28 weeks of its current finiancial year, Punch said it had continued to perform in line with management expectations, with core estate like-for-like net income for the half year expected to be broadly in line with the 1.5% growth reported for the first 20 weeks to January 4.
“Management expectations for the full year remain unchanged with the core estate expected to deliver like-for-like net income growth of up to 1%,” it added. “The pub investment and non-core pub disposal programmes remain on track with full year capital investment expected to be c£45million and disposal proceeds anticipated to be c£100m.”
Executive chairman Stephen Billingham said: “We are convinced that a consensual restructuring is by far the best outcome for all stakeholders, and we will continue to work with all stakeholders to reach a consensus on the restructuring. No-one can be in any doubt about the consequences of failing to agree a consensual deal.
“We call on all parties to work together constructively to agree a restructuring. Everyone has something to gain by agreeing a restructuring that will retain the material financial synergies and provide certainty and stability for the business from which all stakeholders will benefit.”