UPDATE 1-Punch management backs down from "final" proposals
* Bondholders block company's restructuring plan
* "Final" proposals back to the drawing board
* Creditors push alternative to equity plan
By Owen Sanderson
LONDON, Feb 12 (IFR) - Punch management has withdrawn its restructuring proposals, which it described as "final" less than a month ago and which were going to be presented to noteholders at meetings on Friday.
The proposals ran into a wall of bondholder objections, with multiple investor groups publicly refusing to sign.
Some of the bondholders are now working on their own restructuring plan, which a source close to the ABI Senior Bondholder Committee described as "well advanced amongst the creditor group".
The investors that have publicly come out against Punch management's proposals include a senior noteholder group known as the ABI Senior Bondholder Committee, which has blocking stakes in senior notes of both securitisations; Angelo Gordon Europe, with a blocking stake in one class of Punch A; Oaktree, with a blocking stake in multiple classes of Punch A; and Warwick Capital Partners, which has a blocking stake in Punch B.
Punch management said on Wednesday that it was withdrawing the restructuring resolutions "in order to facilitate a period of further engagement with stakeholders", but reminded noteholders that both securitisations will default without a consensual restructuring.
"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," said a notice from the management.
The source close to the ABI Senior Bondholders said: "Punch PLC [the management of the equity] has wasted the last two months trying to get their shareholder-friendly deal to stick, whilst talking up the risk of default. 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."
A source close to the company said that most resistance to its original plan had come from junior creditors who appeared willing to risk the company going into default so they might be able to trade the claims resulting in such a chaotic situation.
This source urged all creditors to back a consensual deal before a final critical deadline of middle of May. "This is a burning platform that will start to get hotter from the beginning of March," said the source, adding that a possible new plan from the company could see juniors receiving equity as well as restructured bonds.
Although both securitisations will breach default triggers without a restructuring (or continued support), what actually happens following default depends on the note trustee, and on direction from noteholders.
An insolvency of Punch B does crystallise a pension liability - which ranks above noteholders - on the securitisation group.
But issuer insolvency, where the issuer cannot pay its debts or is balance-sheet insolvent, is not the same as a contractual Event of Default, as defined in the securitisation documents. In an Event of Default, the securitisation documents define what occurs, rather than the statutory insolvency procedure. This means noteholders can ask to waive the Event of Default if they choose.
"Punch A and Punch B have about GBP200m of cash and have been offered lenders' support," said the source close to the ABI Senior Bondholders Committee. "The creditor plan can be implemented after a default if necessary - but a default is entirely avoidable."
Punch management's proposals, outlined on January 15, would have cut debt from GBP2.3bn to GBP1.83bn and net leverage from 11 to 8.7 times Ebitda.
The meetings on Friday will still be held for procedural reasons, but no resolution will be put forward, and the meetings will run on a tighter schedule, since no business is being discussed.
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