Punch drunk: Battered ABS bondholders face knockout blow
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Punch drunk: Battered ABS bondholders face knockout blow

From Punch Taverns to a string of commercial real estate-backed deals, borrowers and bondholders in distressed European securitizations are squaring up for a bitter fight. The chaotic process by which these structures threaten to unravel will be a lasting legacy of the ABS binge. Louise Bowman reports.

FOR SHEER CHUTZPAH it takes some beating. When Giles ­Thorley, the man behind UK pub group Punch Taverns for the past decade, joined private equity outfit TDR Capital at the beginning of this year he announced that the industry "will need to get smarter". If by that he meant that firms should sweat their assets rather than just add leverage, a quick look at Punch Taverns, which he quit in March 2010, might suggest that it is advice that the pub group could have followed under his watch too. Having worked with Guy Hands at Nomura’s principal finance group in the 1990s, Thorley led the flotation of Punch in 2002 and oversaw breakneck expansion of the estate, which at one stage numbered 8,500 pubs. He also oversaw a slump in the share price from £13.75 in May 2007 to 32p in January 2010 (it was trading at 68p in late February 2011) and the accumulation of staggering amounts of debt: £3.1 billion ($5 billion) on an equity value of £440 million – practically all of which is securitized. The company made a net loss of £160 million last year (albeit an improvement on the £406 million pre-tax loss it racked up in 2009).

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