Slaughter and May is advising Punch Taverns on its £2.4bn securitised debt restructuring as the UK’s largest pub company warns creditors it could face administration.
On Monday (10 June) a powerful group of lenders rejected plans to reduce the pub group’s interest payments to £32m a year. Slaughters led by corporate partner David Johnson is advising longstanding client Punch, which owns around 5000 pubs across the UK.
Under the revised plans, Punch asked senior bondholders to approve a reduction in debt service payments of £600m over five years. However, a special committee set up by the Association of British Insurers to represent lenders rejected the plans this week, dismissing them as ‘vague’ and only a marginal improvement on proposals submitted in March.
Without concessions being reached Punch faces the possibility that it will be unable to meet its debt covenants.
Slaughters has a long standing relationship with Punch, which built up high levels of debt during a series of acquisitions during the boom years, owning around 7000 pubs at its peak and earning itself a place in the FTSE 100.
The Magic Circle firm has led on Punch’s major acquisitions and disposals including a market changing £2.75bn acquisition of Allied Domecq in 1999, followed by the flotation of Punch on the London Stock Exchange in 2002, when the company was valued at between £620m and £744m.
Shortly after the turn of the century Punch gifted Slaughters with a significant corporate acquisition almost every year, including the £1.19bn acquisition of pub group Pubmaster in 2003, the purchase of Innspired Group from Alchemy in 2004 for £353m, the £233m buy-out of pub operator Avebury in 2005, and the takeover of another 869 pubs from market rival Admiral Taverns for £326m in 2006, in which TLT also had a role.
However, the company suffered at the hands of the financial crisis and in 2009 Slaughters advised the group on a rights issue worth £350m and handled the sale of 11 managed pubs to Greene King for £30.4m as the company endeavoured to reduce its debt.