Tue 04/06/2021 12:36 PM
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Relevant Documents:
Q1 FY 2021 Report (Securitization Group)
Q4 FY 2020 Report (Securitization Group)
Punch Taverns Offering Circular
May 2020 consent solicitation


The sponsors of U.K. pub chain Punch Taverns are considering investing some equity into the business in order to address the group's upcoming maturities, sources told Reorg. The group has a bullet maturity of £90.1 million on its class A3 notes due on Sept. 30, 2021, and £190.3 million of bullet maturity on class A6 notes due Sept. 30, 2022.

Punch could also pursue asset sales, sources added. The company disclosed the disposal of 74 pubs in its fourth quarter 2020 report, raising £28.3 million from the sales. The raising of a similar amount through further pub sales could be sufficient to address the September maturity when combined with its £52.7 million liquid facility which can be used to pay maturities on class A notes, sources pointed out. However, the group would still have £190.3 million maturity to be addressed on Sept. 30, 2022.

In total, the Punch B securitization group has issued three class A senior secured bonds due 2021, 2022 and 2024. In addition, the group has class B3 secured notes due 2025, however the £90.1 million due September 2021 is the trigger for imminent action. Punch currently runs approximately 1,151 pubs within its securitization structure under various brands and is owned by Patron Capital and May Capital.
 
Punch Taverns
 
12/06/2020
 
EBITDA Multiple
(GBP in Millions)
Amount
Maturity
Rate
Book
 
£52.7M Liquidity Facility 1
-
 
 
 
Total Liquidity Facility
-
 
 
Class A3 SSNs Due 2021 2
95.0
Sep-30-2021
7.369%
 
Class A6 SSNs Due 2022 3
203.8
Mar-30-2022
5.943%
 
Class A7 SSNs Due 2024 4
133.8
Mar-30-2024
5.267%
 
Total Class A Secured Notes
432.6
 
5.7x
Class B3 Due 2025
72.9
Dec-30-2025
7.750%
 
Total Class B Notes
72.9
 
6.6x
Lease Liabilities
7.8
 
 
 
Total Lease Liabilities
7.8
 
6.7x
Total Debt
513.3
 
6.7x
Less: Cash and Equivalents
(83.7)
 
Net Debt
429.6
 
5.6x
Operating Metrics
LTM Reported EBITDA
76.2
 
 
Liquidity
Other Liquidity
57.2
 
Plus: Cash and Equivalents
83.7
 
Total Liquidity
140.9
 
Credit Metrics
Gross Leverage
6.7x
 
Net Leverage
5.6x
 

Notes:
EBITDA is adjusted EBITDA including the COVID-19 amendment deed. The group has an additional £52.7M liquidity facility available if the group is unable to pay in full amounts due on the swap loan or the class A notes.
1. Amount as per Punch Taverns S&P report on 10-21-2020
2. Notes have an amortizing structure with a bullet payment of £90.1M due on Sept 30, 2021
3. Notes have an amortizing structure with a bullet payment of £190.3M due on Sept 30, 2022
4. Notes have an amortizing structure with a bullet payment of £90.6M due on March 30, 2024

An equity injection and/or asset sales to cure its September maturity would also give Punch breathing room to address the £190.3 million in maturities due September 2022. The pub chain is expecting to address this maturity off the back of positive trading following the reopening of pubs on April 12, sources said.

All options, including for the group’s 2022 maturity, depend on the level of EBITDA generation the chain achieves upon reopening from April 12, sources said.

Should Punch pursue further asset sales, they will have to be compliant with conditions placed on selling core pubs outside of its securitized groups. Currently, Punch can sell about 4% of its core pubs in a 12 month period and about 20% of its core pubs cumulatively, according to sources. It is unclear how many core pubs were included in the 74 disclosed in its fourth quarter report. In this regard, the company might pursue a consent solicitation with its bondholders in exchange for a fee allowing the chain to dispose of more of its core assets, sources said.

Punch’s A class bondholders are also fragmented, sources said, with large holders in the U.K. but other creditors in Europe. This raises difficulties in reaching consent among holders over new money or a consent solicitation in regards to the disposal of Punch’s core pubs.

The pub chain did, however, enter a consent solicitation in respect of its A class securitization notes in May 2020. The group agreed a covenant amendment, which allowed it to add back Covid-19 effects such as rent deferrals or reductions in securitization EBITDA used to calculate covenants, which would have otherwise put pressure on its ability to meet financial covenants.

The company had cash levels of about £84 million as of Dec. 16, 2020. Net cash inflow from operating activities totaled £10.6 million for the first quarter of this year compared with £11.2 million a year earlier. The group’s capital expenditure and financial investment figure stood at £22.7 million while net cash inflow was £25.2 million compared with a cash burn of £5.2 million a year earlier. The group reported assets in value of £99.7 million as of Dec. 6, 2020.

-- Thomas Baker
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