The company saw its shares plummet in late May after it said it had received a debt restructuring proposal from a group of its creditors which would reduce the group's total net debt by around
The proposals would see junior notes in Punch A and Punch B exchanged for cash, new junior notes, and new ordinary shares in a debt-for-equity swap. A group of junior creditors also would subscribe for ordinary shares in the company at a significant discount to the current market price in order to raise additional funds which would be used to repay junior notes in the Punch A securitisation.
However, the proposals would also dilute the current shares in the company to 15% of its proposed new share capital.
In its statement Thursday, it said it now has agreement over the proposals with stakeholders who own or control about 59% of the notes across Punch A and B, about 54% of the senior notes across both classes, about 62% of the junior notes across both classes, and about 54% of its share capital.
"The board has carefully considered, with its advisers, the proposals and the resulting significant equity dilution. It believes that it has considered all feasible alternatives to the proposals and it has sought to minimise the level of equity dilution for shareholders. Given the broad level of stakeholder support for the proposals, the absence of sufficient support for alternatives and the prospect of near-term default in the securitisations absent a restructuring, the board believes that the proposals are in the interests of shareholders as a whole and has therefore initiated the process to finalise and implement the proposals as soon as appropriate," it said in the statement.
However, it also cautioned that there's still a risk that it can't successfully implement the proposals because they need the support of other investors outside the stakeholder group who are backing the deal.
Those supporting the deal include Alchemy Special Opportunities LLP, Avenue Europe International Management LP,
Talks over the debt restructuring have been dragging on, with different classes of Punch creditors disagreeing on various proposals to restructure the debt because any proposal will bring disadvantages to one class or another. However, the company and the creditors need a deal as Punch risks breaching covenants on the debt and defaulting.
The Punch A and Punch B notes are currently benefiting from covenant waivers which were approved by noteholders on
The proposals, if implemented, would mean the company's pro-forma net debt to Ebitda leverage will fall to about 7.6 times. Its gross securitisation debt of
"These proposals have a high level of support, which reflects the hard work of a large number of stakeholders. There are still hurdles to be overcome before reaching complete agreement but we view the current situation as very positive and that a successful restructuring can be implemented. Continued constructive dialogue and determination from all involved will be required to achieve this," Punch Chairman
The company ran up a debt pile of several billion pounds through an expansion spree, but was then hit hard when the financial crisis and ensuing economic downturn weighed on its trading.
Its Punch A securitisation is
It has been selling off hundreds of pubs to help bring down its debt and shore up its balance sheet. It realised
Punch also said Thursday that it is on track to meet its full-year profit expectations. Like-for-like net income from its so-called "core" estate - those not earmarked for sale - was up 1.4% in its fiscal third quarter, and the same amount in the 44 weeks to
Punch said its disposal programme remains on track to deliver at least
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