Punch Taverns slides - and recovers - after negative City comment

Shares in Punch Taverns recovered today after a piece of negative City research sent the company's stock tumbling by more than 20 per cent.

The group's shares fell 22 per cent this morning to around 50p after the market digested a note published by Redburn Partners, which has criticised the pub operator in the past, suggesting shareholders' equity in the business could be wiped out.

After a clarification from Redburn Punch's shares recovered to effectively yesterday's close of 61.5p, after a 15 per cent fall yesterday.

Redburn analyst Charles Winston argued, among other points, that such was the debt position of the UK's leading pub operator that it would not even be able to undertake a balance sheet-boosting rights issue.

After publishing its original research yesterday Redburn was forced to correct some of its financial and economic assumptions after being contacted by Punch.

However, the firm said that while its assessment of the likelihood of the pubco defaulting on its 'B' securitisation was incorrect, it still believed Punch was a "'zombie company' and effectively worthless to equity investors".

The firm stressed that it still believed the operator would remain in a cash trap situation "for many years, denying cash to equity holders for possibly a very long time".

A spokesman for Punch said: "This is one analyst's view and his assumptions are based on factual inaccuracies.

"It is quite straight forward; redemption is very different from buying in the market."

The spokesman was referring to Redburn's assertion that Punch had redeemed some of its debt notes, which would trigger a series of further onerous payments. This assertion was incorrect, the spokesman added.