Punch Taverns, the UK’s largest pub owner, hopes to raise £350m with a share issue as its struggles to service its £5b debt.
The company wants to raise the money to insure it has enough cash to pay back £275m of convertible bonds (used to purchase Spirit Group in 2006), which mature in December 2010, and pay back other debt.
Punch has been working to reduce its debt and sold off £171m worth of pubs and other assets in the 40 weeks to 30 May 2009. Gross debt has been slashed by £404m since the start of its current financial year.
Despite this, the company’s debt still stood at £5b at the end of its half year in April. With beer sales falling and landlords feeling the pinch from falling consumer spending due to the recession, Punch’s cash flow is under pressure and the company has moved to safeguard its financial position with the share issue.
Giles Thorley, chief executive of Punch Taverns, said: “Today’s announcements are a clear sign to the market, our partners, our customers and our employees of Punch’s ability and determination to move beyond challenging market conditions, to focus on fundamentals and continue to drive operational change through the business to deliver long term shareholder value.”
Punch, which revealed pre-tax profit in the half year had fallen to £82m (2008: £133m), also said today that work to arrest the decline in its business was now beginning to show dividends.
Although like-for-like sales in the company’s managed division are 1.2% down year-on-year to date, Punch has seen a reduction in the overall rate of decline.
The rate of decline in its leased business - of which 1,250 of its weakest performing pubs were put into a turnaround division earlier this year - has been arrested but EBITDA for the 40 weeks ended 30 May was down 11.2% year-on-year.
By Chris Druce
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