Investors balk at pub landlord’s debt restructure

Oliver Smith
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DISGRUNTLED investors wiped almost 30 per cent off the value of Punch Taverns yesterday after the indebted pub company said it is nearing a deal to restructure its £2.3bn debt mountain, which could see it offer bondholders a debt for equity deal.

“We’ve made substantial progress with groups including the ABI,” said a person close to Punch Tavern’s management, who admitted the proposal would result in equity dilution.

The proposal, which is backed by noteholders that control 34 per cent of Punch’s debt, includes plans to reduce the company’s net debt by £600m, leaving the firm owing around £1.6bn.

Punch has been at loggerheads with its lenders for over a year on the correct structure for dealing with its debt mountain. In February Punch was forced to return to discussions with bondholders after they failed to support its restructuring plans.

The latest proposal includes plans for junior notes in both of Punch’s two securitised debt vehicles, Punch A and Punch B, to be exchanged for a combination of cash, new junior notes and also ordinary shares in the company.

Punch Taverns said its board would need more time to consider the value that the deal would offer to existing shareholders. It added that a further extension to its debt obligations – currently due to expire on 30 June – would be needed to provide enough time to complete any restructuring. Shares closed down 29.3 per cent at 10.25p.