Punch shares sink on news of cash call
SHARES in pub company Punch Taverns plummeted yesterday after it unveiled a £350m fundraising aimed at reducing its large debt burden.
Stock in the firm plunged 30 per cent to 104p by yesterday’s close.
Punch, which owns 7,900 pubs around the UK, said it would use the bulk of the proceeds to buy back £275m in outstanding convertible bonds, admitting that tough trading conditions meant it might not be able to redeem them when they mature in December 2010.
“While we are confident of the longer-term expectations for the group and our expectations for the full-year remain unchanged, we remain very cautious over the near-term due to the lack of forward visibility on trading outlook,” the company said.
Punch said it aims to raise half of the money through a firm placing and half through an open offer, with the price set at 100p per share yesterday following a book build.
The offer price is a four per cent discount to yesterday’s closing price, but a staggering 49 per cent discount to the closing price on Friday.
“Punch is making a major move to address its debt concerns,” KBC Peel Hunt analyst Paul Hickman wrote in a note to clients, estimating that the capital raising would allow Punch to redeem its convertibles and repay about £140m of other debt.
Pubs have suffered in the recession, putting Punch under pressure as it services outstanding debt of about £4.2bn.
The company has suspended dividend payments, slashed costs, and halted pub acquisitions to prioritise debt reduction, buying back £334m of debt at a cost of £205m.