Longstanding Magic Circle client warns creditors that it could face administration
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 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 5,000 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 last month, 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 longstanding relationship with Punch, which built up high levels of debt during a series of acquisitions during the boom years, owning around 7,000 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 £335m and the £219m buy-out of pub operator Avebury in 2005.
However, the company suffered during 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.