LONDON May 22 Punch Taverns, Britain's second-largest leased pub group, is trying to win shareholder support for a restructuring of its 2.3 billion pound ($3.6 billion) debt, banking sources said.
Blackstone and Goldman Sachs are advising on talks which are proving difficult as many shareholders are hedge funds, including Alchemy, Avenue Capital Group, Glenview Capital, and Luxor Capital, banking sources said.
A restructuring requires shareholder consent as it could dilute their stakes. Many hedge fund shareholders are also bondholders and are finding it difficult to agree to a restructuring which would hit the value of their bonds, banking sources said.
Punch Taverns has embarked on restructuring talks as, despite forging ahead with the sale of its 2,000 worst-performing pubs, it is unlikely to have raised sufficient funds by 2015, when high amortisation payments start on its debt.
The company's 2.3 billion pounds debt could rise if swap and liquidity facilities are added, bankers said.
The sale of 2,000 pubs will leave Punch Taverns with a core estate of 3,000 leased pubs.
The company is working to get shareholder approval and subsequently creditors on board with a consensual restructuring due to a complex debt structure. Punch operates as one company but its debt is split between two securitisation structures, which could lead to lengthy and contentious intercreditor battles, bankers said.
Discussions with shareholders are likely to last until mid August, when it hopes sales will have increased during a busy Olympics summer. If shareholders agree to a restructuring, the company will enter talks with lenders in the second half of the year, bankers added.
Punch demerged its better performing managed pubs division Spirit Pub last year to cut billions of pounds of debt. Its pretax profit in the 28 weeks to March 3 fell to 33 million pounds from 41 million pounds a year ago.