Ailing Punch raises cash to ease fears
PUB group Punch Taverns yesterday raised around £375million in an attempt to ease fears over its crippling debt in the face of falling beer sales.
Chief executive Giles Thorley said the group had launched the placing and open offer in response to investor demands for certainty over £275million in bonds falling due in December next year.
The rest of the money will be used to pay down other parts of the group’s £4.4billion debt.
Punch, which owns 8,000 pubs, saw shares plummet 44½p to 104p. The sale of 375million shares at 100p apiece was heavily dilutive.
Punch was worth £396 million at Friday’s close. The company also warned trading conditions continued to be “challenging” with sales still falling.
It also announced a series of measures designed to address problems identified by an influential committee of MPs, who called for a competition investigation into the relationship between pub groups and their tenants.
Previously Punch had sought to raise the cash to pay down debt through a series of measures, such as selling pubs and scrapping the dividend.
“A number of shareholders said there was still a perception of a risk out there, and they wanted it taken off the agenda,” said Thorley.
“We wanted the bonds to stop being an issue. The offer has been well supported by shareholders.”
Proceeds to the company, once the costs of the fundraising are stripped out, will be around £350million.
The vast majority of Punch’s pubs are operated under a tied system, where tenants pay rent and have to buy beer from the company.
MPs on the Business and Enterprise Select Committee believed this should be investigated. T
horley yesterday outlined Punch’s response, and said the industry should be left to sort out its own problems.
Among other measures, Thorley advocated setting up an independent body to assess rents.
Sales in the group’s tenanted arms fell by 11.2 per cent, while those in the managed arm, pubs operated directly by Punch, fell 1.2 per cent. Thorley said there were signs of business “stabilising”.
Analyst reaction was mixed. KBC Peel Hunt welcomed the “major move to address its debt”, while Evolution Securities said the money raised was not enough.