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Pleased as Punch with debt restructuring plan 20 January 2014

After more than a year of talks with key stakeholders, pubs group Punch Taverns PLC has finalised its debt restructuring plan.

In an effort to improve its balance sheet and debt-to-earnings ratio, Punch Taverns has attempted to restructure its Punch A and Punch B securities.

According to the pubs operator, the modified plans include fixed or target amortisation schedules for all senior notes; modified Spens clause protection on all senior notes for any prepayments ahead of the amortisation schedules; increased Payment In Kind coupons on junior notes, and strengthened operational covenants.

The commitment of the company’s cash resources is conditional on the approval of all classes of Punch A and B securitisation noteholders.

Failure to implement the finalised proposals would result in a default in the near-term, leading to the depletion of the securitisation cash resources which are being used to facilitate restructuring due to the compulsory prepayment of £188m of available cash to Class A notes at par and the loss of the company’s £52m cash contribution.

Punch Tavern’s trading update for the 20 weeks to January 4 stated that like-for-like net income in its core estate was up 1.5%, and expected growth in average net income per pub across its entire estate.

There is also an expectation for its core estate to remain stable, delivering like-for-like net income growth of up to 1% for the current financial year.

The plan stated that pub investment and non-core pub disposal programmes remain on track, with full year capital investment expected to be in the vicinity of £45m, while disposal proceeds to come in around £100m.

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