(Adds details, analyst comment; updates share price)
May 27 (Reuters) - British pub operator Punch Taverns Plc said on Tuesday that certain debtholders had proposed arestructuring that would likely reduce its 2.3 billion pound($3.9 billion) debt pile by about 26 percent.
However, Punch Taverns' stock sank as much as 31 percentafter the company said the proposed debt-for-equity swap planwould mean that current shareholders would represent just 15percent of the total issued share capital.
Punch Taverns, which has about 4,300 pubs, was hit hard byBritain's double-dip recession and, in January, proposed arestructuring plan to avoid a default, which was rejected byshareholders.
The new proposals, announced on Tuesday and backed by 34percent of the company's debtholders, would reduce its total netdebt by about 600 million pounds, Punch Taverns said in astatement.
"These terms are different to previous ones: they wouldresult in a 26 percent reduction in total net debt, materiallyreducing financial risk, but at the cost of equity dilution,"Numis Securities analysts said in a note.
The company's debt structure is complex and split into twosecuritised vehicles. Punch A holds 1.45 billion pounds of grossdebt, while Punch B holds the rest, according to the company's2013 annual report.
The new proposals include junior notes in Punch A and PunchB to be exchanged for a combination of cash, new junior notesand shares in a debt-for-equity swap.
Punch Taverns declined to provide any additional comments onthe proposal when contacted by Reuters.
However, the company said it would not be able to launch theproposals before the June 30 default deadline, meaning thatPunch A and Punch B would require an extension to covenantwaivers to start the restructuring.
Numis cut its rating on the company' stock to "sell" from"hold" and lowered its price target to 10 pence from 11 pence.
Punch Taverns shares were down 29.3 percent at 10.57 penceat 1132 GMT. They fell to a low of 10 pence in morning tradingon the London Stock Exchange. ($1 = 0.5936 British Pounds) (Reporting by Aastha Agnihotri in Bangalore; Editing byGopakumar Warrier and Savio D'Souza)