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Tue 27th May 2014 - Breaking News - Punch Taverns publishes debt-for-equity swap plan
Punch Taverns publishes debt-for-equity swap plan: Punch Taverns has published details of revised restructuring proposals that involve a debt-for-equity swap that would see bondholders take a 85% equity stake in the company. The company stated: “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 circa 7.7x at August 2014. Gross securitisation debt of £1,582 million would have an effective interest rate of circa 7.9% including PIK interest (c.7.1% cash pay interest).” The company added: “The proposals are supported in principle by a group of creditors to the Punch A and Punch B securitisations who together own or control circa 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. 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. 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.”
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