UPDATE 1-Punch management backs down from "final" proposals

* Bondholders block company's restructuring plan

* "Final" proposals back to the drawing board

* Creditors push alternative to equity plan

By Owen Sanderson

LONDON, Feb 12 (IFR) - Punch management has withdrawn its restructuringproposals, which it described as "final" less than a month ago and which weregoing to be presented to noteholders at meetings on Friday.

The proposals ran into a wall of bondholder objections, with multipleinvestor groups publicly refusing to sign.

Some of the bondholders are now working on their own restructuring plan,which a source close to the ABI Senior Bondholder Committee described as "welladvanced amongst the creditor group".

The investors that have publicly come out against Punch management'sproposals include a senior noteholder group known as the ABI Senior BondholderCommittee, which has blocking stakes in senior notes of both securitisations;Angelo Gordon Europe, with a blocking stake in one class of Punch A; Oaktree,with a blocking stake in multiple classes of Punch A; and Warwick CapitalPartners, which has a blocking stake in Punch B.

Punch management said on Wednesday that it was withdrawing the restructuringresolutions "in order to facilitate a period of further engagement withstakeholders", but reminded noteholders that both securitisations will defaultwithout a consensual restructuring.

"The Board remains of the view that a consensual restructuring is in thebest interests of all stakeholders and can be agreed ahead of the next covenantreporting date of April 15," said a notice from the management.

The source close to the ABI Senior Bondholders said: "Punch PLC [themanagement of the equity] has wasted the last two months trying to get theirshareholder-friendly deal to stick, whilst talking up the risk of default. So,it is time for the Boards of the borrowers, Punch A and B, to step forward toconclude the alternative deal that has support from a broad base of creditors."

A source close to the company said that most resistance to its original planhad come from junior creditors who appeared willing to risk the company goinginto default so they might be able to trade the claims resulting in such achaotic situation.

This source urged all creditors to back a consensual deal before a finalcritical deadline of middle of May. "This is a burning platform that will startto get hotter from the beginning of March," said the source, adding that apossible new plan from the company could see juniors receiving equity as well asrestructured bonds.

Although both securitisations will breach default triggers without arestructuring (or continued support), what actually happens following defaultdepends on the note trustee, and on direction from noteholders.

An insolvency of Punch B does crystallise a pension liability - which ranksabove noteholders - on the securitisation group.

But issuer insolvency, where the issuer cannot pay its debts or isbalance-sheet insolvent, is not the same as a contractual Event of Default, asdefined in the securitisation documents. In an Event of Default, thesecuritisation documents define what occurs, rather than the statutoryinsolvency procedure. This means noteholders can ask to waive the Event ofDefault if they choose.

"Punch A and Punch B have about GBP200m of cash and have been offeredlenders' support," said the source close to the ABI Senior BondholdersCommittee. "The creditor plan can be implemented after a default if necessary -but a default is entirely avoidable."

Punch management's proposals, outlined on January 15, would have cut debtfrom GBP2.3bn to GBP1.83bn and net leverage from 11 to 8.7 times Ebitda.

The meetings on Friday will still be held for procedural reasons, but noresolution will be put forward, and the meetings will run on a tighter schedule,since no business is being discussed.