Punch Taverns hoping to raise £350m
Punch Taverns has announced its intention to raise £350m via a firm placing and an open offer of new ordinary shares and use the cash to make a tender offer to purchase all of its outstanding convertible bonds.
The new shares will be issued at the offer price determined by the market and opens immediately and will close no later than 430pm today. Goldman Sachs International and Merrill Lynch International are acting as joint sponsors and joint bookrunners in respect of the Firm Placing and the Placing and Open Offer.
Punch said while it remained "confident" about the longer term prospects, it remained "cautious" about the prospects of any significant improvement in trading in the near term.
A statement said: "However, given the challenging economic conditions which Punch continues to face and the uncertainty surrounding forecast revenue, cash flows, disposal activity and the ability of the Group to repurchase debt at a discount to par, it is possible that the Group will not be able to make sufficient payments outside the Punch A and Punch B Securitisations or generate sufficient cash outside the securitisations to allow the Company to repay the Convertible Bonds in full on maturity (December 2010).
"As such, the Board strongly believes that the Firm Placing and the Placing and Open Offer represent an attractive alternative for facilitating repayment of the Convertible Bonds and providing funds for the repurchase of securitisation notes at a discount to par (if appropriate opportunities arise) which in turn will assist the Group in providing covenant headroom under the securitisations."
It said the move would afford it more flexibility for its ongoing disposal programme, allow management to focus on long term value creation and is an "attractive alternative to disposing of core pubs at prices that would not be in the best interests of shareholders in the longer term".
Punch is also inviting to buy back all convertible bonds at a price of no less than 95%. It will use the net proceeds of the firm placing and open offer to purchase any of the bonds offered for sale.
"Today's announcements are a clear sign to the market, our partners, our customers and our employees of Punch's ability and determination to move beyond the current challenging market conditions, to focus on fundamentals and continue to drive operational change through the business to deliver long term shareholder value," said Punch chief executive Giles Thorley.
"We are grateful to our shareholders for the support that they have shown."
Current trading
Punch said trade for the 40 weeks to 30 May remained on course to meet its expectations. "Trading results to date reflect the challenging market conditions being faced by the sector," it said. "The wider recessionary economic conditions have significantly reduced consumer confidence and impacted the level of disposable income being made available for leisure activities.
"Although we anticipate that demand levels are unlikely to improve in the near term, we are on track to meet our expectations for the financial year. Trading performance in the third quarter of the financial year shows early indication that our actions to stabilise performance are seeing some success. Improved trading during March and April benefited from softer comparatives, principally due to a later Easter this year and a poor, early Easter last year.
"Trading during May has been more mixed given tougher, weather driven comparatives a year ago.
"While we are confident of the longer term prospects for the Group and our expectations for the full year remain unchanged, we remain very cautious over the near-term due to the lack of forward visibility on trading outlook."
