TIDMPUB
RNS Number : 6862K
Punch Taverns PLC
26 June 2014
PUNCH TAVERNS PLC
("Punch" or the "Company")
Interim Management Statement for the 16 weeks to 21 June 2014
and Restructuring Update
Financial and Operational highlights - profits in line with
management expectations
n On track to meet full year profit expectations
n Core estate like-for-like net income up 1.4% in the third
quarter (+1.4% 44 weeks to 21 June 2014)
n The disposal programme remains on track to deliver at least
GBP100 million of net proceeds for the full year
n Strong investment pipeline in core pubs continues (average
spend of approximately GBP100k per pub)
Restructuring update
Following the announcement on 27 May 2014, a group of
stakeholders in the Punch A and Punch B securitisations have
continued to discuss the details of restructuring proposals (the
"Proposals") which were set out in that announcement. These
discussions have focused on finalising the terms of the Proposals
and preparing detailed term sheets to facilitate the implementation
of the Proposals. The Proposals have also been given further
consideration by the Company.
Status of the Proposals
The Proposals have now been expanded into detailed term sheets
which set out broadly similar terms to those published on 27 May
2014. In particular, junior notes would be exchanged for a
combination of new junior notes, cash and 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 at a discount to par. A summary of the proportions
of new junior notes, cash and ordinary shares to be allocated to
each class of existing notes, together with an outline of the terms
on which the group of junior creditors would subscribe for ordinary
shares in the Company, is set out in the Appendix. The detailed
term sheets are available on the Punch website:
www.punchtavernsplc.com/Punch/Corporate/Investor+Centre/Investor+announcements/2014/
Following the completion of these discussions between
stakeholders, the Proposals are now supported by a broad range of
stakeholders (the "Stakeholder Group"):
-- the Stakeholder Group comprises the ABI Special Committee
together with a number of individual funds or subsidiaries of such
funds advised or managed by Alchemy Special Opportunities LLP,
Avenue Europe International Management LP, Angelo, Gordon & Co
LP, Glenview Capital Management LLC, Luxor Capital Group LP,
Oaktree Capital Management LP, Seer Capital Management LP and
Warwick Capital Partners LLP; and
-- the Stakeholder Group represents institutions who in
aggregate own or control c.59% of the notes across Punch A and
Punch B, c.54% of the senior notes across Punch A and Punch B,
c.62% of the junior notes across Punch A and Punch B and c.54% of
the equity share capital of Punch.
Each institution in the Stakeholder Group has undertaken to
support the Proposals and to vote its holdings of equity shares
and/or notes in favour of resolutions required to implement a
restructuring. These undertakings are subject to certain milestones
being met, including that a restructuring is launched and
documentation regarding the Proposals sent to shareholders and
noteholders by 11 August 2014.
Impact of the Proposals
The Proposals would result in a reduction in total net debt
(including the mark-to-market on interest rate swaps) of GBP0.6
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 GBP0.6
billion would result in a sustainable capital structure for the
Group with the pro-forma net debt to EBITDA leverage of the Punch
group falling to c.7.6x([1]) at transaction close. Gross
securitisation debt([2]) of GBP1,564 million would have an initial
effective interest rate of c.7.9% including PIK interest (c.7.1%
cash pay interest).
Board's consideration of the Proposals
The Board continues to believe that a consensual restructuring
is required to avoid a near-term default in the securitisations,
which would be expected to have material adverse consequences for
all stakeholders and, in particular, for shareholders given the
various financial and contractual linkages between the
securitisations and the rest of the Punch group.
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.
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 (including the monoline
insurers, liquidity facility providers and swap providers).
Accordingly, there can be no certainty that the Proposals will be
successfully implemented.
Covenant waiver requests
Punch A and Punch B are currently benefiting from covenant
waivers which were approved by noteholders on 13 May 2014. These
waivers will expire on 4 August 2014 absent the launch of a
restructuring by 3 July 2014. The Board believes that it will not
be possible to launch the Proposals, or any consensual
restructuring prior to this deadline. Accordingly, to ensure that
no default occurs in the securitisations whilst the Proposals are
being finalised and implemented, Punch A and Punch B have today
given notice convening noteholder meetings on 18 July 2014 for the
purposes of voting on further covenant waiver requests.
The requests include temporary waivers of the Debt Service Cover
Ratio covenant and certain other provisions of the securitisation
documents and, if granted, will expire at the latest on 19 November
2014. It is a condition of the waivers that certain milestones are
met, including that a restructuring to implement the Proposals is
launched by 11 August 2014. Each member of the Stakeholder Group
has undertaken to support the covenant waiver requests. The
covenant waiver requests require the support of all classes of
noteholders in Punch A and Punch B and other securitisation
creditors (including the monoline insurers, liquidity facility
providers and swap providers). Accordingly, there can be no
certainty that the required level of support will be obtained.
Copies of the documents relating to the requests, which include
further details of the terms of the respective waivers sought, are
available on the Punch website:
www.punchtavernsplc.com/Punch/Corporate/Investor+Centre/Investor+announcements/2014/
Timetable
Subject to the success of the covenant waiver requests and the
receipt of the requisite approvals at noteholder and shareholder
meetings and other stakeholder approvals, the Board expects that
implementation of the Proposals will be completed in the final
quarter of the calendar year.
Stephen Billingham, Executive Chairman of Punch Taverns plc,
commented
"We continue to make progress toward a consensual restructuring.
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."
26 June 2014
Enquiries: Tel: 01283 501
948
Punch Taverns plc
Stephen Billingham, Executive Chairman
Steve Dando, Finance Director
Media: Brunswick Tel: 020 7404
5959
Jonathan Glass, Mike Smith
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.
Disclaimer
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.
APPENDIX
Full details of the terms of the Proposals are set out in the
detailed debt term sheets available on the Punch website:
www.punchtavernsplc.com/Punch/Corporate/Investor+Centre/Investor+announcements/2014/
The following key terms relating to the exchange of existing
notes, and the terms on which the Company would issue new ordinary
shares, have been reproduced below for reference.
Exchange of existing notes in Punch A and Punch B
Punch A
25 per cent. of existing Class A1(R) Notes and Class A2(R) Notes
will be exchanged for new Class A1(V) Notes and Class A2(V) Notes,
respectively, which will be subject to variable amortisation.
The remaining 75 per cent. of existing Class A1(R) Notes and
Class A2(R) Notes will redesignated as Class A1(F) Notes and Class
A2(F) Notes, respectively, which will be subject to a fixed
amortisation profile targeting 1.3x FCF DSCR in FY15-17 inclusive,
and 1.2x FCF DSCR thereafter.
Existing Class M1 Notes, Class M2(N) Notes, Class B1 Notes,
Class B2 Notes, Class B3 Notes, Class C(R) Notes and Class D1 Notes
will be exchanged at varying discounts to par for a combination of
cash, new Class M3 Notes, new Class B4 Notes and/or ordinary shares
in the Company in the following proportions:
Class of Notes Cash proportion Class M3 Note Class B4 Note Ordinary shares Total
proportion proportion proportion consideration (as
percentage of
par)
------------------- ---------------- ------------------ ------------------- ------------------ ------------------
(as a percentage of the consideration)
------------------- ----------------------------------------------------------------------------- ------------------
Class M1 Notes: 22.4 per cent. 45.1 per cent. 12.0 per cent. 20.5 per cent. 100 per cent.
------------------- ---------------- ------------------ ------------------- ------------------ ------------------
Class M2(N) Notes: 40.6 per cent. 45.1 per cent. 14.3 per cent. - 90 per cent.
------------------- ---------------- ------------------ ------------------- ------------------ ------------------
Class B1 Notes: 22.4 per cent. 45.1 per cent. 12.0 per cent. 20.5 per cent. 62.5 per cent.
------------------- ---------------- ------------------ ------------------- ------------------ ------------------
Class B2 Notes: 22.4 per cent. 45.1 per cent. 12.0 per cent. 20.5 per cent. 62.5 per cent.
------------------- ---------------- ------------------ ------------------- ------------------ ------------------
Class B3 Notes: 40.6 per cent. 45.1 per cent. 14.3 per cent. - 57.5 per cent.
------------------- ---------------- ------------------ ------------------- ------------------ ------------------
Class C(R) Notes: 22.4 per cent. 45.1 per cent. 12.0 per cent. 20.5 per cent. 25.0 per cent.
------------------- ---------------- ------------------ ------------------- ------------------ ------------------
Class D1 Notes: 40.6 per cent. 45.1 per cent. 14.3 per cent. - 12.0 per cent.
------------------- ---------------- ------------------ ------------------- ------------------ ------------------
Ordinary shares making up part of the consideration above would
be issued at a fixed price of 7.75 pence per share.
Punch B
Existing Class A3 Notes, Class A6 Notes and Class A7 Notes will
remain outstanding, subject to amended terms and conditions.
Existing Class A8 Notes will be redeemed in full at par plus
accrued interest.
Existing Class B1 Notes, B2 Notes and C1 Notes will be exchanged
at varying discounts to par for a combination of new Class B3 Notes
and/or ordinary shares in the Company in the following
proportions:
Class of Notes Class B3 Note proportion Ordinary shares proportion Total consideration (as percentage of par)
---------------- ------------------------- --------------------------- -------------------------------------------
(as a percentage of the consideration)
---------------- ------------------------------------------------------ -------------------------------------------
Class B1 Notes: 42.2 per cent. 57.8 per cent. 95 per cent.
---------------- ------------------------- --------------------------- -------------------------------------------
Class B2 Notes: 42.2 per cent. 57.8 per cent. 95 per cent.
---------------- ------------------------- --------------------------- -------------------------------------------
Class C1 Notes: - 100 per cent. 55 per cent.
---------------- ------------------------- --------------------------- -------------------------------------------
Ordinary shares making up part of the consideration above would
be issued at a fixed price of 7.75 pence per share.
Individual funds or subsidiaries of such funds advised or
managed by Alchemy Special Opportunities LLP , Avenue Europe
International Management LP, Angelo, Gordon & Co LP, Glenview
Capital Management LLC, Luxor Capital Group LP, Oaktree Capital
Management LP and Warwick Capital Partners LLP would subscribe for
a further GBP8.4 million in principal amount of additional Class B3
Notes to be issued for an aggregate cash consideration of GBP7.0
million (such additional Class B3 Notes to be allocated among the
funds managed by the institutions above pro rata to their projected
respective shareholdings in the Company following implementation of
the Proposals).
Issue of ordinary shares by the Company
The Company would issue 2,483 million ordinary shares as part of
the debt-for-equity swap described above.
In addition, the Company would issue a further 1,290 million
ordinary shares at 3.88 pence per share to be allocated between
individual funds or subsidiaries of such funds advised or managed
by the following institutions and in the following amounts (the
Firm Placing):
Institution Number of shares
------------------------------------------- -----------------
Alchemy Special Opportunities LLP 38.7 million
------------------------------------------- -----------------
Avenue Europe International Management LP 366.9 million
------------------------------------------- -----------------
Angelo, Gordon & Co LP 61.3 million
------------------------------------------- -----------------
Glenview Capital Management LLC 478.8 million
------------------------------------------- -----------------
Luxor Capital Group LP 257.2 million
------------------------------------------- -----------------
Oaktree Capital Management LP 61.3 million
------------------------------------------- -----------------
Warwick Capital Partners LLP 25.8 million
------------------------------------------- -----------------
Total: 1,290 million
------------------------------------------- -----------------
Following implementation of the Proposals, the Company's issued
share capital would be divided approximately as follows:
Shareholder group Percentage of issued share capital Number of shares
------------------------------------ ------------------------------------ -----------------
Existing Shareholders 15.0 per cent. 666 million
------------------------------------ ------------------------------------ -----------------
Holders of junior notes in Punch A 13.2 per cent. 585 million
------------------------------------ ------------------------------------ -----------------
Holders of junior notes in Punch B 42.8 per cent. 1,898 million
------------------------------------ ------------------------------------ -----------------
Firm Placing purchasers 29.0 per cent. 1,290 million
------------------------------------ ------------------------------------ -----------------
Total: 100.0 per cent. 4,439 million
------------------------------------ ------------------------------------ -----------------
Additional financial information
Absent a default occurring in Punch A and/or Punch B, the Punch
group currently expects to generate underlying EBITDA of between
GBP201 million and GBP209 million in the current financial year.
This guidance replaces any previous profit guidance provided for
the financial year to August 2014:
EBITDA(1)
---------------------------------- ------------------
Punch Group 52 weeks to 16 August GBP197m - GBP205m
2014
---------------------------------- ------------------
GBP4m
* Additional 53(rd) week
---------------------------------- ------------------
FY14 Punch Group EBITDA to 23 GBP201m - GBP209m
August 2014
---------------------------------- ------------------
(1) EBITDA before non-underlying items. The current financial
year ending 23 August 2014 will include an additional 53(rd)
week
([1]) Based on pro-forma net securitisation debt at closing
(excluding swap mark-to-market) of GBP1,524 million, less GBP6
million of PGE cash liquidity balances and mid-point Punch group
underlying EBITDA guidance of GBP201 million for the 52 weeks to 16
August 2014
([2]) Excluding swap mark-to-market
This information is provided by RNS
The company news service from the London Stock Exchange
END
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