Punch warns on debt default again

The group this morning reported that trading has continued in line with management expectations, with core estate like-for-like net income for H1 expected to be broadly in line with the 1.5% growth reported for the first 20 weeks to 4 January. Management expectations for the full year remain unchanged with the core estate expected to deliver like-for-like net income growth of up to 1%, the company stated.

Punch also said its non-core pub disposal programmes remain on track, with full year capital investment expected to be c£45m and disposal proceeds anticipated to be c£100m.

Restructure process​

Regarding its debt restructure process, Punch said: “As announced on 12 February 2014, Punch has extended the period of engagement with stakeholders and the board remains of the view that a consensual restructuring is in the best interests of all stakeholders.

“Neither securitisation has acquired bonds nor benefitted from EBITDA support in the most recent quarter. Underlying trading for the half year is expected to be broadly in line with management expectations and consequently, while we cannot predict with certainty what the DSCR (Debt Service Cover Ratio) level will be, we anticipate that one or both securitisations will fail their respective DSCR financial covenants with respect to the covenant testing date of 1 March 2014 when they are next tested and reported on 15 April 2014.

“In the absence of a consensual restructuring, failure to achieve the second quarter DSCR financial covenant in the relevant securitisation when reported on 15 April 2014 would result in a default in the relevant securitisation within a further 30 days.

“Moreover, failure to effect a restructuring in the near-term will lead to a default in both the Punch A and Punch B securitisation, which is expected to have a material negative impact on the business, including material dissynergies and disruption to the business.

“As a result, it is in the interests of all parties to agree a consensual restructuring ahead of the next covenant reporting date of 15 April 2014, and to put in place a sustainable long-term capital structure for the securitisations.”

'Focus minds'​

Stephen Billingham, executive chairman of Punch Taverns, said: “We are convinced that a consensual restructuring is by far the best outcome for all stakeholders, and we will continue to work with all stakeholders to reach a consensus on the restructuring. No-one can be in any doubt about the consequences of failing to agree a consensual deal.

“We call on all parties to work together constructively to agree a restructuring. Everyone has something to gain by agreeing a restructuring that will retain the material financial synergies and provide certainty and stability for the business from which all stakeholders will benefit.”

A Punch spokesman said: “This statement intends to focus the minds of our stakeholders on the need for a consensual restructuring and act as a catalyst for doing so.”