STATEMENT FROM PUNCH TAVERNS' ABI SENIOR NOTEHOLDERS COMMITTEE
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.
Punch A 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 deleveraging.
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.
Punch B 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 Punch A; * 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.
Going forward 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.