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Punch Taverns blinks first in £2.3 billion game of chicken with bondholders

‘Default entirely avoidable,’ say lenders.

The indebted company has blinked first in the high stakes game of chicken that UK pub group Punch Taverns has been playing with its bondholders.

Having threatened its lenders with default on its £2.3 billion debt pile unless they voted through a controversial restructuring this Friday, Punch executive chairman Stephen Billingham rather sheepishly declared the vote was off 48 hours before it was due to take place.

Stephen Billingham, executive chairman of Punch Taverns

“Following feedback from a range of stakeholders, Punch has decided to withdraw the resolutions which were to be put to the noteholder meetings convened for February 14, 2014, in order to facilitate a period of further engagement with stakeholders,” he announced on Wednesday. “As previously announced, both securitizations will default without a consensual restructuring,” he maintained, rather desperately.

“The board remains of the view that a consensual restructuring is in the best interests of all stakeholders and can be agreed ahead of the next covenant reporting date of April 15, 2014.”

This will now be the fifth attempt to get the restructuring of Punch’s two pub securitizations agreed and there is a palpable sense the company might have threatened to default on the deals once too often.

“Punch PLC has wasted the last two months trying to get their shareholder-friendly deal to stick, whilst talking-up the risk of default,” says a source close to the ABI senior bondholder committee. “So it is time for the boards of the borrowers, Punch A and B, to step forward to conclude the alternative deal that has support from a broad base of creditors.

“The process to date has been a shareholder-led attempt to get a deal to stick that is great for shareholders, but doesn’t work. An alternative restructuring plan is well advanced amongst creditor groups, and the next step is for the Punch A and B boards to engage in discussions directly with their creditors to finalize it.

“The creditor plan can be implemented after a default if necessary – but a default is entirely avoidable.”

Punch Taverns is being advised on the restructuring by Andrew Wilkinson and Sarah Mook at Goldman Sachs and Martin Gudgeon and David Riddell at Blackstone. Rothschild is advising the bondholders.

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