TIDMPUB
RNS Number : 6400G
Punch Taverns PLC
10 June 2013
PUNCH TAVERNS PLC
("Punch" or the "Group")
Interim Management Statement for the 12 weeks to 25 May 2013 and
Capital Structure Update
Financial and Operational highlights - profits in line with
management expectations
n On track to meet full year profit expectations
n Improving like-for-like trends in net income; core estate
like-for-like net income down 0.7% in the third
quarter (-3.3% 40 weeks to 25 May 2013)
n 94% of core estate let on substantive agreements
n 246 pubs and certain other assets sold for GBP84 million,
slightly ahead of book value and at a multiple of
18x EBITDA
n Trading performance driven by actions taken in letting,
investment, food development and increased
field team support
n Investment in core pubs continues (average spend of c.GBP100k
per pub)
Capital structure update
Following the announcement of restructuring proposals for the
Punch A and Punch B securitisations on 7 February 2013, Punch has
undertaken an extensive process of engagement with a broad range of
the Group's stakeholders. This process has provided Punch with a
wide range of feedback from stakeholders on a number of aspects of
the restructuring proposals.
Following review of this feedback, Punch is announcing revised
restructuring proposals ("Revised Restructuring Proposals") that
reflect the material points which it has been able to address. The
changes are intended to achieve an equitable solution by directing
more of the finite cash resources available to the Group to the
senior classes of notes, whilst still providing good value recovery
for the junior classes of notes. In the opinion of the Board these
changes are in the interests of all stakeholders and increase the
likelihood of successfully implementing a restructuring.
Highlights of the Revised Restructuring Proposals
n Creates a robust, sustainable debt structure with next planned
refinancing not until 2029:
targeting a reduction in contractual debt service payments of
over GBP600 million (over five years),
reduced cash interest payments of c.GBP32 million per year and
deleveraging at the Group level equivalent
to c.1.8x EBITDA by 2018;
n Maximises the benefits of the Group structure for all
stakeholders: the Punch A and Punch B
securitisations will continue to benefit from the material
financial and operational synergies, estimated
at GBP25 million per year, which are available to them by virtue
of being part of the wider Group;
n Improved covenant protection for creditors: no ability to
upstream excess cash out of the
securitisations(1) , tighter disposal covenants and the
inclusion of a target prepayment covenant;
n Accelerated repayment of senior noteholders ahead of other
stakeholders: senior
noteholders in both the Punch A and Punch B securitisations to
benefit from accelerated prepayment of
debt (targeted at c.GBP500 million over five years), reduction
in the cash interest payable on junior notes
and the removal of the ability to upstream excess cash from the
securitisations1;
n Senior noteholder cash-out option:intention is to provide a
proportion of class A fixed rate
noteholders in the Punch A and Punch B securitisations with an
option to sell their senior notes for cash
in conjunction with acceptance of the Revised Restructuring
Proposals;
n Option for certain senior noteholders to waive their rights to
note prepayment: Punch is
aware that, in light of the current trading price of senior
notes, certain supportive senior noteholders
may prefer not to receive some of the planned debt repayments.
In addition, a substantial junior
noteholder has indicated a willingness to cancel some of their
notes in exchange for a combination of
cash at a material discount to par and reinstated notes at par.
In light of this, Punch is exploring the
possibility of making certain modifications to the Revised
Restructuring Proposals that would reduce the
leverage of the Punch A securitisation and would not materially
impact the securitisation's cash debt
service obligations.
n Materially better position than the alternative: in the
scenario in which the Revised
Restructuring Proposals are not effected, we expect Group
leverage would be c.3x debt to EBITDA
higher by 2018 than under the Revised Restructuring Proposals;
and
n Broader base of support for the Revised Restructuring
Proposals: the Board expects that,
given the changes made since 7 February 2013, the Revised
Restructuring Proposals will be supported
by a broader group of stakeholders.
Full details of the Revised Restructuring Proposals, and an
overview of the key changes made to the restructuring proposals
announced on 7 February 2013, are set out below.
Stephen Billingham, Executive Chairman of Punch Taverns plc,
commented:
"Our profit performance for the year to date has been in line
with our expectations, with improving trends in the underlying
business. Our trading performance has benefited from recent
operational improvements through continued investment in our core
pubs and increased field team support and we are on track to meet
our full year profit guidance.
The Revised Restructuring Proposals reflect the results of an
extensive process with stakeholders. Importantly, these proposals
achieve an equitable solution by directing more of the Group's
finite cash resources to the senior classes of notes, whilst still
providing good value recovery for the junior classes of notes.
Support is required from a number of stakeholders who will have
a range of views on the Revised Restructuring Proposals. We will
continue to engage with all stakeholders and will be inviting all
stakeholders to attend a meeting this week to discuss the detail of
the Revised Restructuring Proposals and next steps before
progressing to implementing a restructuring in June 2013."
10 June 2013
A presentation will be available on the Punch website
www.punchtavernsplc.com from 9.00am. A video webcast of the
presentation will also be available on the investor section of the
website from 9.00am.
Enquiries: Tel: 01283 501
948
Punch Taverns plc
Stephen Billingham, Executive Chairman
Steve Dando, Finance Director
Restructuring:
Goldman Sachs International Tel: 020 7774
Andrew Wilkinson 1000
Sarah Mook
The Blackstone Group International Partners Tel: 020 7451
LLP 4000
Martin Gudgeon
David Riddell
Media: Brunswick Tel: 020 7404
5959
Jonathan Glass, Mike Smith
Goldman Sachs International, which is authorised by the
Prudential Regulation Authority and regulated by the Financial
Conduct Authority and the Prudential Regulation Authority in the
United Kingdom, is acting as financial adviser to Punch and for no
one else in connection with the capital structure review and will
not be responsible to anyone other than Punch for providing the
protections afforded to clients of Goldman Sachs International nor
for providing advice in connection with the capital structure
review, the content of this announcement or any matter referred to
herein.
The Blackstone Group International Partners LLP, which is
authorised and regulated by the Financial Conduct Authority in the
United Kingdom, is acting as financial adviser to Punch and for no
one else in connection with the capital structure review and will
not be responsible to anyone other than Punch for providing the
protections afforded to clients of The Blackstone Group
International Partners LLP nor for providing advice in connection
with the capital structure review, the content of this announcement
or any matter referred to herein.
Forward-looking statements
This report contains certain statements about the future outlook
for Punch. Although we believe our expectations are based on
reasonable assumptions, any statements about future outlook may be
influenced by factors that could cause actual outcomes and results
to be materially different.
Throughout this report, references to forward-looking statements
regarding the performance of the Group and anticipated debt levels
assume the successful implementation of the Revised Restructuring
Proposals and performance of the Group in line with the Board's
expectations.
THIRD QUARTER TRADING UPDATE
Trading has been in line with our expectations with an improving
trend in core estate like-for-like net income, being down 0.7% in
the third quarter, resulting in a decline of 3.3% for the first 40
weeks of the year to 25 May 2013.
Our trading performance is benefitting from the actions we have
taken in the areas of letting, investment, food development and
increased field team support and we are on track to meet our full
year profit guidance.
The disposal programme remains ahead of our target to realise
GBP105 million of net proceeds in the current financial year.
During the first 40 weeks we sold 246 pubs and certain other assets
for total proceeds of GBP84 million, slightly ahead of book value
and at a multiple of 18x EBITDA.
CAPITAL STRUCTURE UPDATE
1. Progress since 7 February 2013
Since the announcement of restructuring proposals for the Punch
A and Punch B securitisations on 7 February 2013, the Group has
continued to engage with a broad range of the stakeholders whose
support would be required to implement any restructuring. This
process of engagement included the availability of extensive due
diligence materials to stakeholders (including the provision of an
Independent Business Review, property valuation reports,
documentation around the securitisations and financial analysis of
the proposed restructurings) and detailed discussions between both
Punch and stakeholders, and between stakeholders themselves.
The feedback received during this process has allowed Punch to
develop the Revised Restructuring Proposals, which Punch believes
are capable of obtaining the support of a sufficient number of
stakeholders to allow them to be implemented successfully. However,
given the nature of the securitisation structures and the differing
interests across the many stakeholder classes, and, as a result,
the competing demands placed on finite cash resources and sources
of value available to the Group, it has not been possible to
reflect all of the views received during the engagement
process.
Punch will continue the process of open and constructive
engagement with all stakeholders and continue to support
stakeholders in completing their due diligence processes ahead of
implementing a restructuring, and will be inviting all stakeholders
to attend a meeting this week to discuss the detail of the Revised
Restructuring Proposals.
2. The Revised Restructuring Proposals
The Revised Restructuring Proposals reflect a number of changes
to the restructuring proposals announced on 7 February 2013,
including:
n Improved covenant protection for creditors through removing
the ability to upstream excess cash out of
the securitisations (subject to the Punch B securitisation being
able to upstream up to GBP4 million per
year to cover ongoing Group costs and liabilities), tighter
disposal covenants and the inclusion of a
minimum repayment covenant;
n Available cash held within the securitisations, estimated to
be GBP157 million at closing, to be made
available on day one to prepay senior notes;
n Accelerated prepayment of senior notes facilitated by reducing
cash interest payable on the junior
notes;
n Class B1, B2 and C1 notes in Punch B to be extinguished and
cancelled at a greater discount using
available cash resources held at the Group level, estimated at
GBP58 million, and issuance of new junior
debt;
n Fixing the amounts payable under the legacy class C1 hedging
arrangements in Punch B following the
cancellation of the class C1 notes;
n Liquidity facilities to be maintained in both securitisations,
sized to provide 18 months peak debt service
cover, with facility sub-limits to be resized each year to
reflect the level of debt service obligation over
the forthcoming 18 month period; and
n Intention to include a cash-out option to provide senior fixed
rate noteholders with the opportunity to
receive a cash payment for their notes in conjunction with
acceptance of the Revised Restructuring
Proposals.
Given these changes the Board believes that the Revised
Restructuring Proposals present a number of benefits for the
Group's stakeholders:
Punch A:
n Creates a robust debt structure, avoiding the risk of
near-term financial covenant default and targeting
deleveraging at the Punch A level equivalent to c.1.4x EBITDA
and at the senior notes level equivalent to
c.2.3x EBITDA over the next five years;
n Creates a sustainable capital structure that allows the Group
to focus fully on the delivery of its business
plan, reduces uncertainty around the securitisation, and enables
the material financial and operational
synergies available to Punch A through being part of the wider
Group to be retained;
n Improves the covenant protection for creditors with no ability
to upstream excess cash out of the
securitisation, tighter disposal covenants and the inclusion of
a minimum repayment covenant;
n Excess cash held within the securitisation, estimated at GBP98
million at closing, to be made available on
day one to prepay scheduled amortisation;
n Accelerated prepayment of senior debt by reducing cash
interest payable on junior notes, with excess
cash and disposal proceeds being applied to the prepayment of
note amortisation. Cash interest
payments to be reduced by an average of c.GBP21 million per
year, increasing the level of excess cash
and further accelerating the level of senior debt prepayment.
The level of mandatory debt
prepayments over the next five years is targeted at c.GBP300
million;
n Junior notes will continue to receive their current coupon in
a structure that delevers over time, with
GBP13 million of interest per year being paid in cash and GBP8
million of interest per year accruing and being
capitalised and amortised in line with the revised schedule;
n Class A2, M2 and B3 noteholders will have the option to vote
on the release of the Ambac monoline
guarantee of those notes in consideration for a coupon uplift in
an amount equal to the guarantee fee
currently paid to Ambac; and
n In the scenario in which the Revised Restructuring Proposals
are not effected, overall Punch A leverage
would be expected to be c.2.4x debt to EBITDA higher by 2018
than under the Revised Restructuring
Proposals, and c.1.5x higher at the Punch A senior note
level.
Punch B:
n Creates a robust debt structure that avoids the risk of
near-term financial covenant default, targeting a
reduction in debt of GBP237 million at completion and
deleveraging equivalent to c.3.4x EBITDA over the
next five years;
n Creates a sustainable capital structure that enables the Group
to focus fully on the delivery of its
business plan, reduces uncertainty around the securitisation,
and enables Punch B to continue to benefit
from the material financial and operational synergies available
to it by virtue of being part of the wider
Group;
n Improves the covenant protection for creditors with no ability
to upstream excess cash out of the
securitisation (subject to being able to upstream up to GBP4
million per year to cover ongoing Group costs
and liabilities), tighter disposal covenants and the inclusion
of a minimum prepayment covenant;
n Excess cash held within the securitisation, estimated at GBP60
million at closing, to be applied on day one
to prepay senior notes;
n Accelerated prepayment of senior debt with all excess cash and
disposal proceeds (after allowing for
GBP4 million per year to cover ongoing Group costs and
liabilities) to be applied to the prepayment of the
most senior classes of notes outstanding. Cash interest payments
would be reduced by c.GBP11 million
per year, increasing the level of excess cash in the
securitisation and further accelerating the level of
senior debt prepayment. The level of mandatory senior debt
prepayments over the next five years is
targeted at c.GBP200 million;
n GBP286 million of junior notes extinguished using GBP58
million of cash held at the Group level and the
issuance of GBP107 million of new class B3 notes;
n Implementation to be conditional on the requisite majority of
class A7 and A8 noteholders approving the
release of the MBIA monoline guarantee of those notes, in
consideration for which they will receive an
increase in coupon equivalent to the guarantee fees which would
otherwise be payable to MBIA; and
n In the scenario in which the Revised Restructuring Proposals
are not effected, overall Punch B leverage
would be expected to be c.5x debt to EBITDA higher by 2018 than
under the Revised Restructuring
Proposals.
3. Cash-out option for senior noteholders
Punch intends to arrange a cash-out option for a proportion of
senior fixed rate noteholders in both the Punch A and Punch B
securitisations. Punch currently expects this option to be provided
on the basis that a proportion of senior noteholders can elect to
sell their senior notes for cash, in conjunction with voting to
accept the Revised Restructuring Proposals. Completion of such note
purchases will be conditional on the Revised Restructuring Proposal
being implemented in respect of the relevant securitisation. Punch
has received expressions of interest from a number of financial
institutions, including certain stakeholders, seeking to assist in
arranging this option. Further details, including the size of the
facility and the price at which the cash-out option will be offered
to noteholders, will be released at the time of the formal launch
of the Revised Restructuring Proposals.
4. Option for certain senior noteholders to waive their rights to note prepayment
The Revised Restructuring Proposal for Punch A provides for a
substantial repayment of the senior notes at par in the years
immediately following completion of the restructuring. Punch is
aware that, in light of the current trading price of these notes,
certain supportive senior noteholders may prefer not to receive
some of these repayments. In addition, a substantial junior
noteholder has indicated a willingness to cancel some of their
notes in exchange for a combination of cash at a material discount
to par and reinstated notes at par.
Accordingly, Punch is considering whether it would be possible
to further broaden the support for the Revised Restructuring
Proposals by making certain modifications to the terms of the
Revised Restructuring Proposals that would reduce the leverage of
the Punch A securitisation and would not materially impact the
securitisation's cash debt service obligations.
5. Consequences of failure to effect a restructuring of the securitisations
The Board remains clear that a restructuring of the
securitisations is required in order to create a sustainable
capital structure. Financial support is currently required to avoid
the Punch A and Punch B securitisations breaching their DSCR
covenants. Failure to implement a consensual restructuring in the
near-term, and the withdrawal of financial support, would be
expected to lead to a default in the relevant securitisation.
While the potential implications of a default cannot be
predicted with certainty, any default is likely to have a material
negative impact for all stakeholders given the risk of material
scale dis-synergies, administrative receivership costs, the
significant short-term disruption to the business and the negative
impact on pub values.
Uncertainties of default and administrative receivership would
be expected to have a negative impact on leverage and cash flows.
Illustratively, for Punch A this would be expected to increase 2018
leverage by c.2.4x EBITDA and for Punch B, c.5x EBITDA when
compared to Punch's Revised Restructuring Proposals.
6. Financial support to the securitisations
To date, the Group has continued to provide financial support to
each of the securitisations in the current financial year in order
to allow the completion of the capital structure review,
identification of restructuring proposals for each securitisation
and discussions with stakeholders in relation to the restructuring
proposals.
Current financial year to Punch A Punch B Total
date
EBITDA support (Sep-12 GBP33m GBP31m GBP64m
to May-13)
Cash upstream (Sep-12 to GBP(33)m GBP(22)m GBP(55)m
May-13)
Net support (Sep-12 to - GBP9m GBP9m
May-13)
Available future cash upstream - GBP3m GBP3m
(FY13)
Net support from cash resources held outside of the
securitisations for the period September 2012 to May 2013 amounted
to GBP9 million, with all of the available cash upstream payments
in the current financial year having been made out of the Punch A
securitisation and a further GBP3 million of cash upstream payments
remaining available from the Punch B securitisation in this
financial year.
While the provision of future financial support to the Punch A
and Punch B securitisations will continue to be reviewed on an
ongoing basis, failure to effect a restructuring for either
securitisation in the near-term may result in the Group ceasing to
provide financial support to one or both of the securitisations,
which in turn would be expected to result in a covenant default in
the relevant securitisation.
In particular, because of the financial linkages between the
Punch B securitisation and the Group, and the need for the Group,
as part of the restructuring proposals, to commit a substantial
majority of its cash resources to delevering the Punch B
securitisation, the scope for the Group to continue to provide
ongoing financial support to the Punch A securitisation in future
may be constrained.
7. Detailed terms of the Revised Restructuring Proposals
Proposed amendments to the terms of the Punch A
securitisation
Overview n Financial support discontinued to the securitisation
n Amend and extend notes through deferral of scheduled amortisation by five years
n c.GBP98 million of cash in Punch A made available on day one to prepay scheduled
amortisation
n No distributions outside of the securitisation to the wider Group
Amortisation n Deferral of current contractual scheduled amortisation payment obligations on
each class of notes for five years (with the legal final maturity dates of the
notes
consequently also extended by five years)
n Mandatory prepayment of scheduled amortisation from excess cash and disposal
proceeds with a target amortisation profile based on business plan assumptions
as described in the section entitled "Cash sweep" below
* Scheduled amortisation amounts in respect of fixed
rate notes to be prepaid without spens (i.e. without
compensation for prepayment). There are no associated
costs for the prepayment of floating rate notes save
that, to the extent that there is over hedging as a
result of the prepayment of scheduled amortisation,
hedging arrangements will be partially terminated and
associated hedge break costs taken into account
Asset disposals n Restrictions on asset disposals to be amended to allow the disposal of:
* All non-core pubs; and
* Up to 7% of core pubs per year, up to a maximum of
25% of all core pubs, to be tested by reference to
EBITDA on the same basis as the current disposals
test (but with existing cumulative limits to be reset
from the date of the restructuring)
Cash sweep n Subject to a GBP15 million minimum cash balance and reserves against future
outgoings, all disposal proceeds and excess cash (having taken into account the
costs of terminating any hedge transactions as described in the section entitled "Hedge
contracts"
below) will be applied in mandatory prepayment of scheduled amortisation amounts due on
the
next succeeding interest payment date pro rata and pari passu
n No distributions outside of the securitisation to the wider Group
Capex n Minimum capex required equivalent to GBP8,000 per core pub per annum,
increasing annually in-line with CPI
Minimum repayment covenant n Minimum cumulative debt repayment covenant to be included, to be tested
annually by reference to a target amortisation profile which reflects business plan
assumptions
n Covenant to be set at 50% of target amortisation profile
n If the minimum prepayment covenant is not met for any tranche of notes in a
given period, a financial adviser will be appointed
Financial covenants n Existing DSCR and net worth financial covenants are to be removed and replaced
with a total leverage covenant
n Total leverage (net debt:EBITDA) covenants:
* FY14-FY19: 12.0x
* FY20-FY21: 11.5x
* FY22: 11.0x
* FY23: 10.5x
* FY24: 10.0x
* FY25: 9.5x
* FY26: 9.0x
* FY27: 8.5x
* FY28 onwards: 8.0x
Coupons n Coupons on class B notes to be modified such that
* Fixed rate noteholders receive existing coupon: 65%
cash interest, 35% accruing and capitalised; capital
amortising as per revised schedule
* Floating rate noteholders receive existing coupon:
LIBOR (100% cash) + existing margin (65% cash
interest, 35% accruing and capitalised; capital
amortising as per revised schedule)
n Coupons on class C and D notes to be modified such that
* Fixed rate noteholders receive existing coupon: 50%
cash interest, 50% accruing and capitalised; capital
amortising as per revised schedule
* Floating rate noteholders receive existing coupon:
LIBOR (100% cash) + existing margin (50% cash
interest, 50% accruing and capitalised; capital
amortising as per revised schedule)
n Interest which is capitalised will amortise at the same rate as the relevant
notes
n Financial guarantee fee:
* Paid 100% in cash to wrapped noteholders as a coupon
uplift (as described in the section entitled
"Monoline financial guarantees" below) if financial
guarantees are released as part of the transaction
* Continue to be paid as cash to Ambac if financial
guarantees remain in place
n Coupon step-ups will be removed on class M2, B3 and D1 notes
Monoline financial n Separate resolutions to be put to class A2, M2 and B3 noteholders to release
guarantees financial guarantees in consideration for a coupon uplift in an amount equal to
the financial guarantee fees to those noteholders
* 0.50% of principal amount outstanding for class A2
notes
* 1.20% of principal amount outstanding for class M2
notes
* 1.44% of principal amount outstanding for class B3
notes
n Implementation of Punch A restructuring will not be conditional on the release of
the financial guarantees; the release of the financial guarantees is a separate
resolution for each relevant class of noteholders
n The release of the class M2 financial guarantee is not conditional on the release
of the class B3 financial guarantee (and vice versa). However, if the class M2
and B3 financial guarantees are not removed then the class A2 financial
guarantee will not be removed
* Release of class A2 financial guarantee requires
consent of 75% of class A2 noteholders, provided 75%
of class M2 and B3 noteholders consent to release of
the class M2 and B3 financial guarantees respectively
n If one or more of the financial guarantees remain in place, monoline financial
guarantee fees in respect of the remaining financial guarantees will continue to
be paid to Ambac, excluding step-up fees
n If the restructuring transaction is successful, but the Ambac financial
guarantees
remain in place for the class B3 notes, then Ambac will only guarantee timely
payment of the cash pay interest and ultimate principal due on the class B3 notes
Hedge n Current hedging to remain in place without reprofiling
contracts n To the extent of overhedging as a result of the prepayment of deferred scheduled
amortisation, hedging arrangements will be partially terminated
n Entry into new hedges permitted, to the extent of any under hedging
Liquidity facility n Liquidity facility commitment to be extended by five years, with pricing to
remain
unchanged
n Liquidity facility commitment sized to cover 18 months peak contractual debt
service: GBP240 million at transaction close
n Amount capable of being drawn is calculated annually and capped to cover
aggregate debt service over the forthcoming 18 months
* Day 1 liquidity facility available reduced to GBP138
million
* Day 1 sub-limit for Class B, C and D notes sized to
c.GBP23 million to ensure 18 months of contractual
debt service available to class A and M notes
* Day 1 sub-limit for Class D notes sized to GBP2
million to ensure 18 months of contractual debt
service available to class A, M, B and C notes
n Rating triggers to be amended to A2/P2/F1
* Allows return of standby drawings to one of the
liquidity facility providers of GBP147 million
Weighted average life (WAL) Current WAL New legal WAL Target (expected)
extension of notes n Class A1: 5 n Class A1: 10 WAL
yrs yrs n Class A1: 6 yrs
n Class A2: 4 n Class A2: 9 n Class A2: 3 yrs
yrs yrs n Class M1: 13 yrs
n Class M1: 9 n Class M1: 14 n Class M2: 18 yrs
yrs yrs n Class B1: 16 yrs
n Class M2: 13 n Class M2: 18 n Class B2: 20 yrs
yrs yrs n Class B3: 22 yrs
n Class B1: 11 n Class B1: 16 n Class C: 23 yrs
yrs yrs n Class D1: 24 yrs
n Class B2: 15 n Class B2: 20
yrs yrs
n Class B3: 17 n Class B3: 22
yrs yrs
n Class C: 18 n Class C: 23
yrs yrs
n Class D1: 19 n Class D1: 24
yrs yrs
Change in debt service n Contractual debt service based on the business
plan over the next five years is forecast to reduce
by c.GBP400 million.
n Mandatory debt prepayments over the five years
based on the business plan are targeted at c.GBP300
million
Proposed amendments to the terms of the Punch B
securitisation
Overview n Financial support discontinued to the securitisation
n Amortisation on class A notes reprofiled
n Class B1, B2 and C1 notes extinguished for a mix of cash at a discount and new
class B3 notes
n Financial guarantee on class A7 and A8 notes to be removed as a condition of the
restructuring
Deleveraging n Class B1, B2 and C1 notes extinguished for total cash consideration of GBP58
million
and total consideration in the form of new class B3 notes of GBP107 million, as
follows:
* The consideration for extinguishing the class B1
notes will comprise a cash offer and a new class B3
note. The cash offer will be for 46.5% of the current
holding at a price of 63.5% with the consideration
for the remaining 53.5% of the current holding being
a new class B3 note issued at 100% of par value.
Therefore a holder of B1 notes with a par value of
GBP100 would receive GBP29.53 in cash and new class
B3 notes with a par value of GBP53.50
* The consideration for extinguishing the class B2
notes will comprise a cash offer and a new class B3
note. The cash offer will be for 46.5% of the current
holding at a price of 61.5% with the consideration
for the remaining 53.5% of the current holding being
a new class B3 note issued at 100% of par value.
Therefore a holder of B2 notes with a par value of
GBP100 would receive GBP28.60 in cash and new class
B3 notes with a par value of GBP53.50
* The consideration for extinguishing the class C1
notes will comprise a cash offer and a new class B3
note. The cash offer will be for 83.0% of the current
holding at a price of 11.0% with the consideration
for the remaining 17.0% of the current holding being
a new class B3 note issued at 100% of par value.
Therefore a holder of C1 notes with a par value of
GBP100 would receive GBP9.13 in cash and new class B3
notes with a par value of GBP17.00
Amortisation and maturity n Amortisation on class A notes reprofiled to target a 1.4x cash DSCR, with final
maturity revised to 2029
* Results in no material contractual amortisation of
class A notes before maturity in 2029
n Mandatory prepayment of most senior classes of notes outstanding, pro rata and
pari passu, from excess cash and disposal proceeds with a target amortisation
schedule to be based on business plan assumptions (as described in the section
entitled "Cash sweep" below)
n Bullet repayment of new class B3 notes in 2029
Coupons n Coupon on class B3 notes to equal 7.25%
n No change to class A3 and A6 note coupons
n Class A7 and A8 note coupons to increase by quantum of respective financial
guarantee fees (as described in the section entitled "Monoline financial
guarantees" below)
Asset disposals n Restrictions on asset disposals to be amended to allow the disposal of:
* All non-core pubs; and
* Up to 7% of core pubs per year, up to a maximum of
25% of all core pubs, to be tested by reference to
EBITDA on the same basis as the current disposals
test (but with existing cumulative limits to be reset
from the date of the restructuring)
Cash sweep n Subject to a GBP10 million minimum cash balance and reserves against future
outgoings, all disposal proceeds and excess cash to be allocated as follows
(having taken into account the costs of terminating the class A8 hedge and/or
legacy class C1 hedging arrangements, as described in the section entitled "Hedge
contracts"
below):
* Not more than GBP4 million per year capable of
distribution to the wider Group to cover ongoing
Group costs and liabilities
* Remaining amounts to be applied for mandatory
prepayment of the most senior classes of notes then
outstanding, on a pari passu basis and pro rata to
the relevant principal amounts then outstanding. The
resulting amortisation schedule of each class of
notes following mandatory prepayments is the target
amortisation schedule
Capex n Minimum capex required equivalent to GBP8,000 per core pub per annum,
increasing annually in-line with CPI
Minimum repayment covenant n Minimum cumulative debt repayment covenant to be included, to be tested
annually by reference to a target amortisation profile which reflects business plan
assumptions
n Covenant to be set at 50% of target amortisation profile
n If the minimum prepayment covenant is not met for any tranche of notes in a
given period, a financial adviser will be appointed
Financial covenants n Existing DSCR and net worth financial covenants are to be removed and replaced
with an interest cover ratio financial covenant (measuring EBITDA:interest
charges) set at 1.1x
Monoline financial n Financial guarantee on class A7 and A8 notes to be removed as a condition of the
guarantees Punch B restructuring in consideration for an uplift in the coupon on those notes
in an amount equal to:
* 0.50% for class A7 notes
* 0.50% for class A8 notes, stepping up to 0.80% after
30 June 2015
Hedge n Hedging arrangements relating to the class A8 notes to remain outstanding on
contracts their current terms save that, to the extent that any prepayment of the class A8
notes would result in an overhedge (in excess of a materiality threshold), the
class A8 hedge will be partially terminated in the amount of such overhedge
n Hedging arrangements relating to the class C1 notes to remain outstanding,
subject to the following amendments:
* Hedge counterparty payments to be made according to a
payment schedule fixed at closing, based on the LIBOR
curve at closing to provide for the maturity of the
swap in 2023
* To the extent that any prepayment of the outstanding
class A notes and class B3 notes would result in the
actual amortisation exceeding contractual
amortisation and a target amortisation schedule
(which is the basis of the Target (expected) WAL
below), the class C1 hedge will be partially
terminated
Liquidity facility n Liquidity facility to remain in place with pricing to remain unchanged
n Liquidity facility commitment sized to cover 18 months peak contractual debt
service: GBP71 million at transaction close
n Amount capable of being drawn is calculated annually and capped to cover
aggregate debt service over the forthcoming 18 months
* Day 1 liquidity facility available reduced to GBP71
million
* Day 1 sub-limit for class B3 notes sized to GBP13
million to ensure 18 months of contractual debt
service available to class A notes
n Rating triggers to be amended to A2/P2/F1
* Allows return of standby drawings to the liquidity
facility provider of GBP168 million
Weighted average life (WAL) Current WAL New legal WAL Target (expected) WAL
extension of notes n Class A3: 5 yrs n Class A3: 16 yrs n Class A3: 10 yrs
n Class A6: 8 yrs n Class A6: 16 yrs n Class A6: 10 yrs
n Class A7: 8 yrs n Class A7: 16 yrs n Class A7: 10 yrs
n Class A8: 11 yrs n Class A8: 16 yrs n Class A8: 10 yrs
n Class B3: N/A n Class B3: 16 yrs n Class B3: 16 yrs
Change in debt service n Contractual debt service based on the business
plan over the next five
years is forecast to reduce by over GBP200
million.
n Mandatory senior debt prepayments over the
five years based on the
business plan are targeted to be c.GBP200 million
8. Next steps
The Board, with its advisers, has undertaken an extensive
process of engagement with the Group's stakeholders. This process
has provided the Board with a wide range of feedback on the
restructuring proposals announced on 7 February 2013 which has
formed the basis for the Revised Restructuring Proposals announced
today. The Board believes that the Revised Restructuring Proposals
achieve an equitable solution by directing more of the Group's
finite resources to the senior classes of notes, whilst still
providing good value recovery for the junior classes of debt.
Support is required from a number of stakeholders who will have
a range of views on the Revised Restructuring Proposals. We will
continue to engage with all stakeholders and will be inviting all
stakeholders to attend a meeting with the company this to discuss
the detail of the Revised Restructuring Proposals and next steps
before progressing to implementing a restructuring in June
2013.
1It is proposed that the Punch B securitisation will be able to
upstream up to GBP4 million per year to cover ongoing Group costs
and liabilities
This information is provided by RNS
The company news service from the London Stock Exchange
END
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