(Corrects to clarify there are three junior investors plus ABI
* Investors will vote against proposals
* Default seen as an empty threat
* Potential to renegotiate not ruled out
By Anil Mayre and Owen Sanderson
LONDON, Jan 27 (IFR) - Three junior holders and a committee
representing senior bondholders of Punch Taverns' securitised
debt said on Monday morning they would reject a proposed
restructuring at an investor meeting scheduled to take place on
In its restructuring proposal launched on January 15, the
company threatened to default if investors fail to agree to the
terms put forward that would cut debt from GBP2.3bn to GBP1.83bn
and net leverage from 11 to 8.7 times Ebitda.
Punch is the UK's leading pub company with over 4,000 pubs,
most of which form the security for GBP2.3bn worth of debt in
the Punch A and B deals. The company says it has accrued costs
over the last three years of around GBP50m including fees
associated with the restructuring.
But a statement from the four creditor groups indicates the
noteholders see default as an empty threat.
"The Creditors and their advisors have carefully considered
the revised proposals issued by Punch and the related legal
documents made available. They are unable to support these
proposals (in relation to either Punch A or Punch B) and
accordingly will vote against the proposals at any meetings of
the Issuer Companies," three firms and the ABI Noteholder
Committee said this morning.
These investors have blocking stakes in the transactions,
meaning they hold large enough majorities of the different
classes of the 16 bonds to reject any proposals.
A source close to the bondholder groups said: "There are
issues with the commercial terms, the structure of the new notes
and the documentation."
The company released a notice on Monday in response, noting
the statement from the bondholders, and saying that it continued
to be available to discuss bondholders' views of the
restructuring proposals. However, it reiterated that the
proposals were final.
It also published the debt amortisation schedules that were
part of the restructuring proposal outlined on January 15, along
with an invitation for noteholders to contact tabulation agent
Deutsche Bank to get hold of the full terms.
A further complication is that a default is not determined
purely by the company. Aside from complaining about the process
and that it has not always had access to related documents, the
ABI Committee says there is over GBP180m of excess cash in the
deal that could be used for short-term support.
Furthermore, even if the deals do default, investors could
appoint an administrator to divest the pub portfolio over a few
years, and in the meantime still collect rent and income -
cashflow that can support the deals.
Senior investors, through the ABI Noteholder Committee, have
previously called for junior debt holders, some of which are
owners of Punch equity, to be equitised as part of any
Angelo Gordon Europe, one of the three named junior
investors in today's statement, said it has a blocking stake in
one class of Punch A.
The two others are Oaktree Capital Management, which has
blocking stakes in multiple classes of Punch A notes, and
Warwick Capital Partners, which has a blocking stake in Punch B
All three firms, plus the ABI Committee, say they are still
willing to work towards a consensual restructuring as they
"believe this to be in the best interests of all stakeholders."
According to Punch's 2013 annual report, Angelo Gordon had a
3.09% shareholding of Punch Taverns as of September 23 2013.
Other substantial holdings (which Punch measures as anything
over 3%) included Glenview Capital Management with 18.19%, Luxor
Capital Group with 10.96%, Octavian Special Master Fund with
8.29%, Aberforth Partners with 8.83%, Alchemy Special
Opportunities with 7.59%, Avenue Capital Management with 6.03%
and Legal & General Investment Management with 3.34%. Some of
these have since topped up holdings, however.
(Reporting by Anil Mayre and Owen Sanderson, editing by Alex
Chambers, Julian Baker)