Investor groups rebuff Punch restructuring plan

* Investors will vote against proposals

* Default seen as an empty threat

* Potential to renegotiate not ruled out

By Anil Mayre

LONDON, Jan 27 (IFR) - Three holders of Punch Taverns'securitised debt said on Monday morning they would reject aproposed restructuring at an investor meeting scheduled to takeplace on February 14.

In its restructuring proposal launched on January 15, thecompany threatened to default if investors fail to agree to theterms put forward that would cut debt from GBP2.3bn to GBP1.83bnand net leverage from 11 to 8.7 times Ebitda.

Punch is the UK's leading pub company with over 4,000 pubs,most of which form the security for GBP2.3bn worth of debt inthe Punch A and B deals. The company says it has accrued costsover the last three years of around GBP50m including feesassociated with the restructuring.

But a statement from the ABI Senior Bondholder Committeeindicates the noteholders see default as an empty threat.

"The Creditors and their advisors have carefully consideredthe revised proposals issued by Punch and the related legaldocuments made available. They are unable to support theseproposals (in relation to either Punch A or Punch B) andaccordingly will vote against the proposals at any meetings ofthe Issuer Companies," three firms said this morning.

These investors have blocking stakes in the transactions,meaning they hold large enough majorities of the differentclasses of the 16 bonds to reject any proposals.

A further complication is that a default is not determinedpurely by the company. Aside from complaining about the processand that it has not always had access to related documents, theABI committee says there is over GBP180m of excess cash in thedeal that could be used for short-term support.

Furthermore, even if the deals do default, investors couldappoint an administrator to divest the pub portfolio over a fewyears, and in the meantime still collect rent and income -cashflow that can support the deals.

Senior investors have previously called for junior debtholders, which are sometimes owners of Punch equity, to beequitised as part of any restructuring.

Angelo Gordon Europe, one of the three investors in today'sstatement, said it has a blocking stake in one class of Punch A.

The two others are Oaktree Capital Management, which hasblocking stakes in multiple classes of Punch A notes, andWarwick Capital Partners, which has a blocking stake in Punch Bnotes.

All three say they are still willing to work towards aconsensual restructuring as they "believe this to be in the bestinterests of all stakeholders."

According to Punch's 2013 annual report, Angelo Gordon had a3.09% shareholding of Punch Taverns as of September 23 2013.Other substantial holdings (which Punch measures as anythingover 3%) included Glenview Capital Management with 18.19%, LuxorCapital Group with 10.96%, Octavian Special Master Fund with8.29%, Aberforth Partners with 8.83%, Alchemy SpecialOpportunities with 7.59%, Avenue Capital Management with 6.03%and Legal & General Investment Management with 3.34%. Some ofthese have since topped up holdings, however.