Dec 07 -
-- We have lowered our ratings on all classes of notes in Punch A following our revision of its business risk profile to the lower end of the “fair” category.
-- The downgrades of the junior and mezzanine notes additionally accounts for our growing concern about the short-term prospects of the securitization, which in our view is accelerating toward a default covenant breach, if the announced restructuring is not accomplished.
-- The outlook is negative.
-- This transaction is a corporate securitization backed by a portfolio of tenanted public houses.
Standard & Poor’s Ratings Services today lowered its credit ratings on all of Punch Taverns Finance PLC’s (Punch A) notes. The outlook is negative (see list below).
The downgrades follow our revision of the business risk profile of Punch A to the lower end of the “fair” category. This reflects our expectation of further declines in the EBITDA generated by the securitized estate both in absolute terms, and on a per-pub basis.
With the reduced cash generation capability and amortization payments on the senior class anticipated to step up in July 2015, our confidence in the likelihood of the junior and mezzanine tranches to be repaid in line with the original promise continues to diminish. The downgrades of the class M, B, C, and D notes, therefore, additionally accounts for our growing concern about the short-term prospects of the securitization, which in our view is accelerating toward a default covenant breach, if the announced restructuring is not accomplished.
We believe that the class B, C, and D notes will be vulnerable to an ultimate default once the parent, Punch Taverns PLC, stops providing support. We expect that during the course of the announced restructuring, these tranches could be offered a solution, which we would consider as a “distressed exchange offer” (as described in “Rating Implications Of Exchange Offers And Similar Restructurings, Update,” published on May 12, 2009 on RatingsDirect on the Global Credit Portal) and receive less value than the original promise.