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East Anglia: Punch Taverns sets out details to debt-for-equity swap

15:01 18 August 2014

Punch Taverns chairman Stephen Billingham.

Punch Taverns chairman Stephen Billingham.

Pub company Punch Taverns today confirmed details of a “critical” plan to tackle its debt mountain with an equity swap which will see the stake of shareholders slashed.

Punch, which is Britain’s second-largest pub owner with around 4,000 tenanted and leased properties, is to hold meetings with shareholders and creditors on September 17 in a bid to secure approval.

The debt-for-equity swap is intended to reduce the group’s borrowings by £600million but will leave its current shareholders owning just 15% of the company.

Punch, which underwent major expansion through a programme of acquisitions before the financial crisis hit, has been left nursing debts of around £2.3billion, even after selling off hundreds of pubs.

The group, which is based in Burton-upon-Trent and has a strong presence in East Anglia where, as a result of past mergers and acquisitions, it owns many former Tolly Cobbold pubs, has been in negotiations with its lenders for nearly two years. The process has been highly complex because there are 16 different classes of debt within two property company subsidiaries owned by the pub chain.

In February, it admitted defeat over an earlier plan which did not involve a debt-for-equity element and was opposed by a number of bondholders who expressed concern that it was skewed in favour of shareholders.

Punch said yesterday that the current plan, which was first announced in June, had so far received the support of 65% of bondholders and 54% of shareholders.

However, the restructuring deal will have to be backed by at least 75% of each group of stakeholders in order to take effect.

Chairman Stephen Billingham said today: “It is of critical importance that shareholders and noteholders vote in favour of the resolutions in order to implement the restructuring and avoid the adverse consequences for the group of the restructuring not proceeding.”

Setting out details of the proposal, Punch said that its existing debt structure was “unsustainable”, with total net debt leverage of 10.8 times earnings.

In the absence of a restructuring, this ratio would increase further, with “material adverse consequences for all stakeholders and, in particular, for shareholders,” it warned.


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