Under the terms of confidentiality agreements with certain stakeholders, Punch is publishing details of restructuring terms proposed by a group of stakeholders in the Punch A and Punch B securitisations (the “Proposals”).
The key terms of the Proposals have been provided to the Company in the form of term sheets for Punch A and Punch B, which are reproduced in the appendix to this announcement.
The Proposals are supported in principle by a group of creditors to the Punch A and Punch B securitisations who together own or control c.34% of the notes across Punch A and Punch B and over 50% of junior notes in both securitisations and the equity share capital of Punch (the “Stakeholder Group”). In addition, whilst the ABI Special Noteholder Committee is not currently signed up to the Proposals, substantial progress has been made in addressing their issues.
Implementation of a consensual restructuring would require 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 proceed.
A restructuring of the securitisations is required in order to avoid a default in both the Punch A and Punch B securitisations, which would be likely to have a material negative impact for all stakeholders.
The Proposals differ in a number of ways from the terms of the restructuring launched by Punch on 15 January 2014. In particular, 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 securitisation.
The Proposals would result in a reduction in total net debt (including the mark-to-market on interest rate swaps) of £0.6 billion. 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 (including the mark-to-market on interest rate swaps) of £0.6 billion would result in the pro-forma net debt to EBITDA leverage of the Punch group falling to c.7.7x at August 2014. Gross securitisation debt of £1,582 million would have an effective interest rate of c.7.9% including PIK interest (c.7.1% cash pay interest).
Any decision by the Board to recommend a proposal involving dilution of existing shareholders would need to be carefully considered in terms of the value which it represents for existing shareholders.
Implementation of the Proposals, or any consensual restructuring involving a significant equity component, results in additional execution complexity. Accordingly, the Board is of the view that it will not be possible to launch the Proposals, or any consensual restructuring involving a significant equity component, prior to the deadline of 30 June 2014 included in the covenant waivers obtained by Punch A and Punch B on 13 May 2014. It is, therefore, likely that Punch A and Punch B will require an extension to the covenant waivers to provide sufficient time to implement a consensual restructuring and Punch will provide further details of any such extension in due course.
Punch Taverns plc: 01283 501 948
Stephen Billingham, Executive Chairman
Steve Dando, Finance Director
Brunswick Tel: 020 7404 5959
Jonathan Glass, Mike Smith
This announcement is not intended to and does not constitute or form part of any offer to sell or invitation to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Proposals set out herein or otherwise, nor shall it (or the fact of its distribution) form the basis of, or be relied on in connection with, any contract therefor or be considered a recommendation that any investor should subscribe for or purchase or invest in any securities.
The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933 as amended (the “Securities Act”) or under any U.S. state securities laws and may not be offered or sold within the United States unless any such securities are registered under the Securities Act or an exemption from the registration requirements of the Securities Act and any applicable state laws is available.