Punch Taverns Restructuring Plan Faces Criticism

A complex restructuring plan for Punch Taverns, the debt-laden landlord group that owns almost one in 10 British pubs, is likely to face criticism from senior bond holders who doubt the company's claims that it will create a "sustainable capital structure", The Guardian reported. Proposals from chairman Stephen Billingham, who is advised by Blackstone Group and Goldman Sachs, are likely to split opinion among Punch stakeholders, pitting traditional institutional investors, who own most of the company's senior debt, against a small group of US hedge funds, which control large equity stakes as well as major holdings in junior bonds. Punch, which leases pubs and arranges beer supply, only officially recognised it would need to restructure its £2.4bn debts to avoid insolvency in October last year, though senior bondholders have been publicly calling for a radical restructuring since March 2011. Billingham has now drawn up that restructuring and among the most controversial aspects is a plan to use £93m of cash reserves to help finance the repurchase of junior bond notes. Although it is proposed this be done at a discount to the face value of the notes, critics of Billingham's plans suggest Punch's overall borrowings are so unsustainable that the fair value of these junior notes ought to be little or nothing. Read more.