Punch Taverns announces Punch A and Punch B restructuring proposals

By Caroline Salls

Pittsburgh, May 27 - Punch Taverns plc published details of the restructuring terms proposed by a group of stakeholders in the Punch A and Punch B securitizations.

According to a news release, the proposals are supported in principle by a group of creditors who own or control about 34% of the notes in Punch A, roughly 34% of the notes in Punch B and more than 50% of the equity share capital of Punch.

In addition, while an ABI special noteholder committee is not currently supportive of the proposals, the company said substantial progress has been made in addressing their issues.

Since implementation of the proposals or any consensual restructuring involving a significant equity component will be complex, Punch said it is unlikely to be possible to launch the proposals or consensual restructuring before the June 30 deadline included in May 13 covenant waivers.

As a result, the company said an extension of the covenant waivers will likely be required.

According to a separate release, the proposals differ in a number of ways from the terms of the restructuring launched by Punch on Jan. 15.

In particular, the company said junior notes in Punch A and Punch B would be exchanged for a combination of not only cash and new junior notes, but also ordinary shares in the company in a debt-for-equity swap.

In addition, a group of junior creditors would subscribe for ordinary shares in the company at a significant discount to the current market price to raise additional funds to be applied to repay junior notes in the Punch A securitization.

Punch said the proposals would result in a reduction in total net debt, including the mark-to-market on interest rate swaps, of £600 million.

In consideration for the debt reduction, the company said the debt-for-equity swap and placing contemplated by the proposals would result in significant equity dilution for existing shareholders. Specifically, Punch said the currently issued share capital would represent 15% of its total enlarged issued share capital following the restructuring.

Punch A details

Under the Punch A restructuring proposal,

• 75% of class A notes will be reinstated as fixed-amortization notes;

• 25% of class A notes will be exchanged for new variable-amortization notes;

• Class M1, B1, B2 and C(R) notes will be extinguished at a discount to par, or at par, in the case of the class M1 notes only, for a combination of 22.4% cash, 45.1% new class M3 notes, 14.3% new class B4 notes and 18.2% ordinary shares in Punch Taverns plc;

• Class M2, B3 and D1 notes will be extinguished at a discount to par for a combination of 40.6% cash, 45.1% new class M3 notes and 14.3% new class B4 notes;

• Outstanding hedges related to class M2 notes will be partially terminated, with the remainder re-allocated to new class M3 notes, and the tenor amended to match that of the class M3 notes;

• Outstanding hedges related to class B3 and D1 notes will be terminated in full;

• Break costs payable for terminated hedges will be settled by issuance of a super senior swap note;

• In each of fiscal years 2015 through 2017, up to £12.5 million of excess cash will be applied on each interest payment date to fund a debt service reserve account (DSRA) for class A notes up to a maximum of £20 million; and

• There will be a firm placing of £50 million of equity in Punch Taverns plc to specified existing parties at 3.81 pence per share to raise additional funds to be applied to partially repay class M-D notes.

Punch B proposal

Meanwhile, the terms of the Punch B proposal include the following:

• Class A3 notes, class A6 notes and class A7 notes will be fully reinstated;

• £50 million of balance sheet cash will be used to pay down 100% of class A8 notes at par, together with about £6 million of associated hedge break costs. Any additional associated hedge break costs will be settled by inclusion within issuance of the super senior swap note;

• Class B1 and B2 notes will be extinguished at a discount to par for a combination of 42.2% new class B3 notes and 57.8% equity in Punch Taverns plc;

• Class C1 notes will be extinguished at a discount to par for equity;

• Outstanding hedge related to class A8 notes and class C1 notes will be terminated in full;

• Break costs payable on terminated hedges will be settled by issuance of a super senior swap note;

• 70% of excess cash will be applied on each interest payment date to fund a DSRA for class A notes up to a maximum of £20 million; and

• There will be a firm placing of £50 million of equity in Punch Taverns plc to specified existing parties at 3.81 pence per share to raise additional funds to be applied to partially repay junior notes in the Punch A securitization.

Punch Taverns is a pub company based in Burton on Trent, England.

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