Statement on behalf of the ABI Senior Noteholder Committee (the “Committee”)
The Committee refers to the announcement issued by Punch Taverns plc (“Punch”)
on 9 December 2013.
The revised proposals announced by Punch, while moving in the right direction,
still need further work to gain approval and would be voted against if
published in the form announced. The Committee’s main observations on the key
terms published yesterday are set out below.
Uses of securitisation cash in the restructuring transaction: Punch’s proposal
to use all securitisation cash to pay down junior notes at a material premium
to market price is not agreed. It is not agreed to give the Company or any
third party a right to cash out senior notes at a price of 105. The Committee
could support a tender using securitisation cash across tranches of notes,
priced equitably and fairly.
Cash leakage to the shareholder: Payments of securitisation cash to the
shareholder, Punch Taverns plc, or PGE are not acceptable until total leverage
(including hedge MTM) is below 3.0x. It is possible to retain cash at PGE by
tendering for Punch B junior notes at a lower price to achieve the same
Class B4 note: The new B4 note could be acceptable with the following
amendments: cash coupon on the £183m nominal only (i.e. not increasing with the
PIK amount each year); no liquidity facility protection; no security or
covenants; and change of control prepayment of the Class A notes at modified
spens upon conversion.
Class B3 Note: The cash leakage to the reinstated B3 note should be less than
£5m per annum. Senior Noteholders are deferring amortisation payments in Punch
B, in part to fund interest payments to be made to the B3. Prior to the first
(modified) Class A maturity in 2020, we remain cautious about leverage.
Liquidity facility protection for the B3 note is not acceptable. The B3 note
should have no covenants or security.
Cash leakage to PGE: Payments of securitisation cash up to the shareholder,
Punch plc, or PGE are not acceptable until total leverage (including hedge MTM)
is below 3.0x.
Required terms common to Punch A and Punch B
The Committee would require additional terms to be included in any proposal for
Punch A and Punch B:
* any prepayments of senior notes must be made with reduced spens (G+100bps),
for the avoidance of doubt this includes the “variable amortisation” notes in
* a 25bps voting fee for senior noteholders;
* to protect the value of the senior notes’ collateral, a maximum of 2% per
annum, or up to 10% of all core pubs, are permitted to be disposed;
* a maximum capex spend of £15,000 per core pub per annum;
* Class A Noteholders will appoint board observers at the appropriate levels in
the Punch group corporate structure and should also have the right to appoint a
majority of the Board at either the Punch A or Punch B Borrower should the
total leverage (including hedge MTM) exceed 8.0x;
* the restructuring of Punch A and Punch B to be interconditional.
We continue to believe that a consensual deal is the best way forward for all
parties. We believe such agreement is capable of being reached and within the
gift of the shareholders of Punch.
The ABI Committee as a group has blocking stakes in a number of classes of
Punch A and B notes, including the Class A of both transactions. The ABI
Committee is advised by Rothschild and Latham & Watkins; its advisors remain
available and open for discussions with other stakeholders.
+44 (0) 20 7280 5000
Andrew Merrett (firstname.lastname@example.org)
Glen Cronin (email@example.com)
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