(Corrects to clarify there are three junior investors plus ABI Noteholder Committee)
* 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 February 14.
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 restructuring.
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 notes.
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)