Punch Taverns gets bond sale boost

Punch Taverns has given itself some breathing space by securing the agreement of all but two of its bondholders to buy back a chunk of its 'A' securitisation vehicle, according to a City analyst.

JP Morgan's James Ainley said the pubco's announcement that 82 per cent of the £93.5m bond sale had been taken up was "good news".

The announcement had a positive effect on Punch's shares price, which after a week of being hammered by short sellers and investors taking to the hills bounced back today, up more than six per cent to 150p.

The pubco also said it was extending the sale period until 10am tomorrow (Wednesday).

"There had been concerns that some bondholders might not want to sell at the price being offered," said Ainley.

"But the fact they have had an 82 per cent take up means they are a step closing to solving some issues, such as their ability to pay back the £295m convertible bond in two years time and refinancing the business."

Some investors have been worried about Punch's ability to pay its convertible bond, which is up in 2010.

But Ainley said: "If Punch can avoid breaching the cash trap tests and if it can get cash out of the securitisations it will have a fighting chance."

Cash trap tests are effectively rules which mean monies can only be released from securitisations if a certain level of financial stability is maintained.

Punch's shares have fallen by more than 80 per cent since the beginning of this year, and have virtually halved in value since it released a trading update at the beginning of September.