Punch Taverns reports progress on restructuring: Punch Taverns has reported “significant progress” has been made during discussions over restructuring of its securitisations and that it is now in a position to set out modified restructuring proposals. A number of significant stakeholders from across the capital structure have indicated a broad level of support for the revised structure of these proposals, although there remain a number of areas on which consensus is still to be reached, the company said. The modified restructuring proposals reflect a number of structural changes requested by senior and junior noteholders, including:
• Deleveraging of the Punch A securitisation: noteholders benefit from a reduction in leverage at completion;
• Reduction in cash leakage: senior noteholders benefit from a circa 54% reduction in cash paid to other stakeholders (over three years) compared to a scenario in which the restructuring proposals are not implemented;
• Repayment of senior notes to a fixed amortisation schedule: senior noteholders benefit from fixed amortisation based on a 1.2x FCF DSCR and amortisation of senior variable notes from any remaining excess cash flow;
• Junior noteholders to receive cash and new LIBOR based cash pay and PIK notes: junior noteholders will receive a mixture of cash, and new LIBOR based cash pay and or higher coupon PIK notes in a delevered securitisation structure.
The Punch board believes that the modified restructuring proposals deliver material benefits to all stakeholders, including:
• Creates a more robust and sustainable debt structure: next expected refinancing for the Punch A and Punch B securitisations is not anticipated to be until 2027 and 2020 respectively;
• Preserves the benefits of the group structure for all stakeholders: both securitisations will continue to benefit from the material financial and operational synergies, estimated at £25 million per year, which are available to them by virtue of being part of the wider Group;
• Materially better position than the alternative: Punch expects that the Punch A and Punch B securitisations gross debt to EBITDA ratio would be c.4x lower by 2018 than under a scenario in which the modified restructuring proposals are not implemented.
Punch stated: “The board believes that these revised proposals are in the interests of all stakeholders, are capable of being successfully implemented and that the modified structure of the proposals has the support of a number of significant stakeholders. However, given the nature of the securitisation structures and the differing interests across many of the stakeholder classes, it has not been possible to reflect all of the views received during the engagement process and, as a result, there remain different and conflicting views from some stakeholders on certain aspects of the proposals. Due to the need to restructure the securitisations to avoid a default in the near-term, Punch will move forward to formally launching final proposals for each securitisation by 15 January 2014. Noteholders will then be asked to vote on the restructuring proposals after the appropriate notice periods.” Executive chairman Stephen Billingham said: “The modified restructuring proposals reflect the results of an extensive process of engagement with stakeholders and incorporate a number of structural changes requested by both senior and junior noteholders. We will now move forward to finalising the restructuring for each securitisation and formally launching the restructurings by 15 January 2014.”