Punch Taverns battles to avoid default18th August, 2014 by Gabriel Savage
UK pub group Punch Taverns has unveiled details of a restructure in its latest effort to reduce “unsustainable” £2.26 billion debts.
The company, which owns around 4,000 pubs across the country, is urging shareholders to accept the plan, whose debt-for-equity swap aims to reduce Punch’s debts by £600 million but will leave them £50 million worse off.
Stephen Billingham, executive chairman of Punch Taverns, stressed that shareholder approval was of “critical importance” as he insisted: “the restructuring will create a more robust balance sheet, which will provide stability for the business, provide a firm base to allow Punch to build on recent improvements in trading and lead to further deleverageing.”
A statement released by the board described the proposals as being “in the interests of all shareholders and deliver a materially better position than the alternative of a default.”
Punch’s problems are rooted in a major expansion push in 2005, when its estate numbered 10,000 pubs. Many of these became unprofitable as the recession hit and consumers cut back on drinking out. The restructuring deal aims to help the group meet its target of disposing of a further 1,000 venues, which will allow it to focus on the profitable sites.
The proposed course of action will be put to Punch shareholders at a general meeting on 17 September. If approved, the new structure will be put in place by 8 October.