Punch Taverns publishes final restructuring proposal: Tenanted pub operator Punch Taverns has published its final proposals for restructuring the company’s £2.3bn securitised debts with amendments to the plans set out last month. The company’s debt sits in two tranches referred to as Punch A and Punch B and the company is pressing ahead with the proposals after 14 months of often-tense negotiations with bondholders. Last month, senior bondholders suggested they would reject the proposals if they are put to a vote. The original plans, tabled in February last year, were rejected by an Association of British Insurers (ABI) committee representing senior lender because they favoured junior lenders. The revised plans, published last month, were described as “moving in the right direction” by the ABI, which, however, still insisted it would not support them if put to a vote. Now Punch has made further changes to the proposals but warned that “failure to implement a consensual restructuring is expected to lead to a default in the relevant securitisation in the near-term”. Executive chairman Stephen Billingham said: “I am pleased to announce formally today the launch of the restructuring of Punch’s securitisation structures, representing the culmination of 14 months of extensive stakeholder engagement. We believe that the restructuring is in the interests of all stakeholders and delivers a materially better position than the alternative of a default. The restructuring will create a robust debt structure which will provide certainty and stability for the business. It will also provide a solid platform to allow Punch to build on the recent improvement in the group’s trading and preserve the material synergies of running the two securitisations as part of the same group. Stakeholders will be able to benefit from the improvements to the business we are putting in place. We want all stakeholders to consider the proposals carefully and thoroughly. We will continue to be available to answer any questions. It is the view of the board that the benefits of approving the restructuring are clear and of benefit to all stakeholders. However, failure to do so will lead to a much worse outcome with considerable uncertainty for the business and potentially significant loss of value.” The company also reported that trading for the 20 weeks to 4 January 2014 was good with like-for-like net income in the core estate up 1.5% and, assisted by weak weather comparatives, delivering growth in average net income per pub across our entire estate. The company added: “Management expectations for the group remain unchanged with the expectation for the core estate to deliver like-for-like net income growth for the current financial year of up to 1%. The pub investment and non-core pub disposal programmes remain on track with full year capital investment expected to be circa £45m and disposal proceeds, raised largely from the disposal of non-core pubs, anticipated to be circa £100m.” Punch stated that the new proposed terms of the restructuring reflect a number of changes to the proposals announced on 9 December 2013 as requested by stakeholders, including: fixed or target amortisation schedules included for all senior notes; modified Spens protection on all senior notes for any prepayments ahead of the amortisation schedules; increased PIK coupons on junior notes; strengthened operational covenants; senior noteholder appointed independent observers to the Boards of the Borrower companies in each securitisation; noteholder voting fee; and interconditionality: Punch’s commitment to apply the group resources which would be necessary for the restructuring to go ahead is conditional on the approval of the restructuring by all classes of Punch A and Punch B securitisation noteholders.

Christie + Co – 2013 saw 3.3% increase in average pub sale price: A record number of pubs sold for ongoing use and a 3.3% increase in the average sales price for pubs made for a confident year in the UK’s pub marketplace – that’s according to Business Outlook 2014, the annual state of the markets report by specialist property adviser Christie + Co. There were signs in 2013 that estate churn slowed as pubcos reached a point of satisfaction with their estates, having disposed of the majority of their bottom-end estates. And despite the continued warnings about the rate of pub closures from some pressure groups, and from inside Parliament, there is evidence that the closure rate has declined. Evidence gathered by Christie + Co from its tally of sold pubs in 2013, showed that the percentage of pubs acquired to remain as pubs reached 67% – 5% up on 2012. Christie + Co director and head of pubs Neil Morgan said: “While trading performance seemed to improve in general terms, the better results were geographically predicated. London remained in its own bubble, trading-wise, and also saw most of the higher premiums paid for pubs. Elsewhere, the UK regions rather reflected the ‘recession-recovery effect’ – the belief that recession starts in the north and recovery in the south was certainly mirrored in the trading performance of pub companies.” The transactional landscape seemed unaffected by the slow recovery, though, as experienced operators, returning entrepreneurs and first-time, lifestyle, buyers flocked to acquire the higher quality of pub that came to the market during the year. Smaller operators sought to pick-off individual, regional sites to add to their burgeoning estates and there was a real appetite for pubs from tenanted lease estates – again reflective of higher quality pubs coming to market. Tenanted pub disposals generally declined to sensible levels as the pubcos sought to improve the tenant relationship rather than continuing to fight over the beer-tie battleground. Morgan added: “The beer tie is going through a natural evolution anyway, and the pubcos understand there is more to be gained by managing the tenant relationship better and encouraging new tenants into the sector.” Distress disposals continue to be something of a way of life in the pubs sector. In late 2013, Christie + Co was instructed by administrators to sell the remaining sites in the Bramwell Pub Company estate, after Stonegate had acquired over 70 sites. Morgan said: “We should not expect Bramwell to be the last word in distress. As we moved towards the close of 2013, the banks announced their intentions to dispose of billions of pounds worth of non-performing loans, signalling a lessening of their exposure to bad property loans – including some, inevitably, in the pub sector. 2013 sent a strong signal that the pub sector is picking up, both in the trading performance of single units and companies, and in the values being achieved by pubs that are being placed on the market – even those that are in distress. As we move into 2014, this state of affairs will alert, and offer encouragement to, those who are looking to either add to their estates, or seeking a return or first-footing in a sector which is looking to grow ever-more-vibrant and stable.”

Christie + Co – branded restaurants set to spread to the regions: The influence of branded restaurant chains in the thriving London market could well be replicated in the UK regions in 2014, according to Business Outlook 2014, the annual state of the markets report by specialist property adviser Christie + Co. Private equity, which invested heavily in the restaurant sector in 2013, is also set to repeat the dose. The restaurant sector was probably less affected by the recession than even those operating within it had possibly expected. Like-for-like sales increased across the board, new restaurant openings increased by over 11% through 2013 and then there was the growing private equity activity. Indeed, the rush of private equity to occupy the restaurant space in the last 12 months has been at a level not seen since the pre-recessionary period prior to 2008. However, individual, independent restaurants still struggled somewhat. Simon Chaplin, director and head of restaurants for Christie + Co, said: “With low interest rates and lowish inflation, the consumer continued to support the sector – buoyed by prices remaining at affordable levels and an ever-expanding palate of interesting cuisines. In fact, it’s hard to remember a time where diners had so much regional and geographical choices of food experience.” Looking ahead to 2014, it is likely that the brands (and private equity) will increasingly come to dominate the restaurants scene in 2014. Simon Chaplin added: “Whether independent operators, and small local and regional groups, can keep pace and compete with the power of the private-equity-backed brands will be interesting to observe. One hopes, for the sake of diversity, that consumers will find enough choice and quality in their local independent establishments.” Elsewhere, Christie + Co forecasts an increase in the number of restaurants that offer regional specialist cuisines, with the prospect that a new array of brands will emerge in these areas. Chaplin added: “The London scene reflects this cosmopolitan and eclectic approach already, but we envisage these tastes of the unique moving increasingly into the regions throughout 2014. However, brandless, imageless and dated traditional restaurant concepts are likely to find themselves under yet further pressure in 2014 – not just from branded rival restaurants but from the broader food offering emanating from the higher quality pub chains.”