Punch unveils plan to restructure £2bn debt pile

PUNCH Taverns has unveiled another restructuring plan to cut its £2 billion debt mountain yesterday.

Chairman Stephen Billingham talked up Punch's performance. Picture: Contributed

It comes after Punch’s bondholders threw out a previous attempt at slashing the pub giant’s chronic debt burden earlier this year.

Yesterday the group said it was hopeful the latest deleveraging proposal would fare better. Punch, whose 400-plus pubs include the Malt Shovel and Beehive Inn in Edinburgh, said: “The board expects that, given the changes made since 7 February, the revised restructuring proposals will be supported by a broader group of stakeholders.”

Punch also said its third-quarter trading had improved, the dual news sending its shares up 3.9 per cent or 0.5p to 13.25p.

The company amassed the debt in an earlier phase of aggressive expansion, only to be thrown off course by a damaging cocktail of the pub smoking ban, cheap alcohol in supermarkets, and a double-dip recession.

Punch’s chairman Stephen Billingham said that Q3 trading performance had benefited “from recent operational improvements, through continued investment in our core pubs (average £100,000 per pub)”.

The group said like-for-like net income in the core estate was down 0.7 per cent in Q3, compared with 3.3 per cent lower in the 40 weeks to 25 May.

In a complex plan covering debt split into two securitised vehicles, Punch A and Punch B, the company is targeting a reduction of £600m in the servicing of its debt over five years, cutting cash interest payments to £32m a year.

It also said it would reduce borrowings to about 1.8 times underlying earnings by 2018. The plan means senior bondholders will get an accelerated pre-payment of debt of about £500m over five years.