Punch Taverns : Restructuring Announcement

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

PUNCH TAVERNS PLC

("Punch" or the "Group")

Launch of the proposed restructuring of the Punch A and Punch B Securitisations

Overview

§ Punch announces the full terms of restructuring proposals (the "Proposals") which represent the completion of an extensive period of engagement and negotiation with stakeholders.

§ The terms of the Proposals are broadly similar to those announced on 26 June 2014.

§ The Board of Punch is unanimously recommending that shareholders vote in favour of resolutions approving the Proposals.

§ The Proposals have the support of a broad range of stakeholders that in aggregate own or control c. 65% of the notes across Punch A and Punch B and c. 54% of the equity share capital of Punch. These stakeholders comprise the ABI Special Committee together with a number of investment funds managed or advised by Alchemy Special Opportunities LLP, Alchemy Special Opportunities (Guernsey) Limited, Avenue Europe International Management, L.P., Angelo, Gordon & Co. L.P., AG Funds, L.P., Bluecrest Capital Management (New York), L.P., Glenview Capital Management LLC, Luxor Capital Group, LP, Moore Capital Management, L.P., Oaktree Capital Management, L.P., Seer Capital Management LP, Serengeti Asset Management, L.P., and Warwick Capital Partners LLP. Ambac (the monoline insurer for the Punch A securitisation) has also agreed to support the Proposals.

§ Implementation of the Proposals is conditional upon the approval of shareholders, all classes of noteholders in Punch A and Punch B and certain other securitisation creditors. In particular, the Proposals will also require the support of The Royal Bank of Scotland plc (a liquidity facility provider to the Punch A and Punch B securitisations and provider of hedging arrangements to the Punch A securitisation), Lloyds Bank plc (a liquidity facility provider to the Punch A securitisation), Citibank N.A., London Branch (the provider of hedging arrangements to the Punch B securitisation) and MBIA UK Insurance Limited (the monoline insurer for the Punch B securitisation) each of whose approval is required to implement the Proposals. Punch has had detailed discussions with these stakeholders over an extended period and will continue the process of securing their support for the Proposals on the basis launched today.

§ The Proposals have been launched within the 10 business day cure period for the 11 August 2014 milestone set out in the Punch A and Punch B covenant waivers, which were approved on 18 July 2014. However, failure to obtain approval for the Proposals from shareholders, noteholders and these other securitisation creditors is expected to lead to near-term default in the Punch A and Punch B securitisations. Both the Punch A and Punch B securitisations would be in default without the benefit of the current covenant waivers, which are conditional upon a restructuring having been approved by all necessary parties by 14 October 2014 (subject to a cure period).

Impact of the Proposals

The Group's existing debt structure is unsustainable, with total net debt leverage of 10.8 times EBITDA. Leverage would be expected to increase following a default, absent a restructuring, and this would be expected to have material adverse consequences for all stakeholders and, in particular, for shareholders, given the various financial and contractual linkages between the securitisations and the rest of the Punch Group.

The Board believes that the Proposals will create a more robust and sustainable debt structure for the Punch Group, with the reduction of total net debt (including the mark-to-market on interest rate swaps) by £0.6 billion, and the consolidated net debt to EBITDA leverage ratio of the Punch Group falling to c. 7.7x .  Gross securitisation debt of £1,585 million at closing will have an initial effective interest rate of c. 7.8% including PIK interest (c. 7.1% cash pay interest).

In consideration for the debt reduction, the debt-for-equity swap and firm placing contemplated by the Proposals would result in significant equity dilution for existing shareholders, such that Punch's currently issued share capital would represent 15% of its total enlarged issued share capital following the implementation of the Proposals.

Board's consideration of the Proposals

The Board has carefully considered, with its advisers, the Proposals and the resulting significant equity dilution. It believes that it has considered all feasible alternatives to the Proposals and it has sought to minimise the level of equity dilution for shareholders. Given the broad level of stakeholder support for the Proposals, the absence of sufficient support for alternatives and the prospect of near-term default in the securitisations absent a restructuring, the Board believes that the Proposals are in the interests of all shareholders and deliver a materially better position than the alternative of a default. The Board is therefore unanimously recommending that shareholders vote in favour of resolutions approving the Proposals.

Timetable and further information

Punch will shortly issue a combined circular and prospectus to its shareholders, setting out details of the Proposals and convening a general meeting for 17 September 2014 at which the requisite resolutions to approve the Proposals will be put to shareholders. Punch is also issuing documents convening meetings of each class of noteholders in Punch A and Punch B for 17 September 2014 to approve the Proposals.

If all requisite shareholder, noteholder and other creditor approvals are obtained, the Proposals are expected to become effective, and dealings in the New Ordinary Shares are expected to commence, on 8 October 2014.

This summary should be read in conjunction with the further details of the Proposals (which includes information on current trading) which are set out below.

Stephen Billingham , Executive Chairman of Punch Taverns plc, commented:

"Today we launch the Punch restructuring, reflecting agreement across multiple stakeholder groups.

The Board believes that the restructuring will create a more robust balance sheet which will provide stability for the business, provide a firm base to allow Punch to build on recent improvements in trading and lead to further deleveraging.

The benefits of approving the restructuring are clear and of benefit to all stakeholders. It is of critical importance that shareholders and noteholders vote in favour of the resolutions in order to implement the restructuring and avoid the adverse consequences for the Group of the restructuring not proceeding."

18 August 2014

Forward-looking statements

This announcement includes "forward-looking information" within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. These forward-looking statements are not based on historical facts, but rather reflect Punch's current expectations concerning future results and events and generally may be identified by the use of forward-looking words or phrases such as "believe", "aim", "expect", "anticipate", "intend", "foresee", "forecast", "likely", "should", "planned", "may", "estimated", "potential" or other similar words and phrases. Similarly, statements that describe Punch's objectives, plans or goals are or may be forward-looking statements.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Punch's actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by these forward-looking statements. Although Punch believes that the expectations reflected in these forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct.

Disclaimer

This announcement is not intended to and does not constitute or form part of any offer to sell or invitation to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the proposals set out herein or otherwise, nor shall it (or the fact of its distribution) form the basis of, or be relied on in connection with, any contract therefor or be considered a recommendation that any investor should subscribe for or purchase or invest in any securities.

The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933 as amended (the "Securities Act") or under any U.S. state securities laws and may not be offered or sold within the United States unless any such securities are registered under the Securities Act or an exemption from the registration requirements of the Securities Act and any applicable state laws is available.

Goldman Sachs International, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as financial adviser to Punch and for no one else in connection with the capital restructuring and will not be responsible to anyone other than Punch for providing the protections afforded to clients of Goldman Sachs International nor for providing advice in connection with the capital restructuring, the content of this announcement or any matter referred to herein.

The Blackstone Group International Partners LLP, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting as financial adviser to Punch and for no one else in connection with the capital restructuring and will not be responsible to anyone other than Punch for providing the protections afforded to clients of The Blackstone Group International Partners LLP nor for providing advice in connection with the capital restructuring, the content of this announcement or any matter referred to herein.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

PUNCH TAVERNS PLC

("Punch" or the "Company")

Recommended proposals relating to the restructuring of the Punch A and Punch B Securitisations

1.         Introduction

Punch today announces the full terms of restructuring proposals for the Punch A Securitisation and the Punch B Securitisation which represent the completion of an extensive period of engagement and negotiation with stakeholders.

The proposals comprise:

●    a Restructuring of the Securitisations including, in particular, the exchange of junior Notes for a combination of new junior Notes, cash and New Ordinary Shares;

●    a Firm Placing of 1,273,005,000 New Ordinary Shares in aggregate, to be allocated between the seven Funds (Alchemy, Angelo, Gordon & Co., Avenue, Luxor, Glenview, Oaktree and Warwick); and

●    a 1 for 20 share consolidation (the "Share Consolidation").

The terms of the proposals are broadly similar to those announced on 26 June 2014.

In order for the proposals to be implemented, it is necessary that:

●    the resolutions required to implement the Restructuring and Firm Placing are approved by shareholders at a general meeting to be held on 17 September 2014;

●    the resolutions required to implement the Restructuring are approved by each class of Noteholders at meetings to be held on 17 September 2014; and

●    the consent of certain other securitisation creditors is obtained.

Capitalised terms used in this announcement are defined at the end of this announcement.

2.         Background to, and reasons for, the proposals

On 24 October 2012, Punch announced that it had completed a detailed review of the capital structure of the Securitisations and that it had concluded that both Securitisations were over-leveraged and unsustainable in their current form and that a Restructuring of both Securitisations was necessary.

Since that date, the Board has considered, with its advisers, the options available and has entered into discussions with certain of the Group's stakeholders to agree the terms of a consensual restructuring. A consensual restructuring is required to avoid a default in the Securitisations, which would be expected to have material adverse consequences for all stakeholders and, in particular, for shareholders.

As part of the capital structure review, and following the announcement of its conclusions in October 2012, the Board engaged in detailed discussions with a broad range of the Group's key stakeholders, including shareholders and Noteholders and their respective advisers, to seek their input on the range of options under consideration to optimise the capital structure. The objective of these discussions was to reach agreement on the terms of a consensual restructuring for both Securitisations that would create a sustainable capital structure for the Group.

This process of engagement with stakeholders has been extensive. A number of different options have been examined in detail, including four sets of proposals publicly announced on 7 February 2013, 10 June 2013, 9 December 2013 and 15 January 2014 respectively. The Board considered that each of these publicly announced proposals was in the best interests of all stakeholders and would deliver material benefits to them, in particular creating a robust and sustainable debt structure, preserving the group structure, and delivering a materially better position for all stakeholders than default. However, given the nature of the Securitisations and the differing interests across many stakeholder classes, and, as a result, the competing demands placed on finite cash resources and sources of value available to the Group, the process of obtaining broad stakeholder support around a consensual restructuring has been difficult and has required significant time.

The proposals announced on 15 January 2014 contemplated stakeholders agreeing to some or all of the following measures: (i) a modification of the financial and operating covenants governing the Securitisations; (ii) partially releasing claims in respect of, or extension of the due date for payment on, existing Notes; and (iii) exchange of existing Notes for a combination of (a) cash and (b) new debt securities issued by the relevant Securitisation. These proposals did not contemplate the issuance of any equity securities, either by Punch or by the Securitisations. Punch received a range of feedback from stakeholders in response to these proposals, in light of which it concluded that a further period of engagement would be required to reach agreement on the terms of a consensual restructuring, and these proposals were withdrawn.

More recently, in order to provide a stable footing for discussions on the terms of a consensual restructuring, the Borrowers sought and obtained from Noteholders on 13 May 2014 a temporary waiver of certain covenants governing the Securitisations. On 27 May 2014, short-form term sheets were published containing details of the restructuring terms proposed by a group of stakeholders in the Securitisations. Following the publication of these terms, Punch continued to negotiate with a wider group of creditors and other stakeholders in order to finalise long-form term sheets containing significantly more detailed terms of the restructuring contemplated in the proposals. A further covenant waiver was sought and obtained from Noteholders on 18 July 2014 to ensure adequate time for final negotiations and to agree the transaction documentation for the consensual restructuring outlined in the proposals.

The proposals summarised in this announcement represent the conclusion of this process over several months of negotiations across the broad range of stakeholders.

The Restructuring and Firm Placing are combined, inter-conditional proposals and the Board believes that they deliver material benefits to all stakeholders, including shareholders.

Specifically, the Restructuring and Firm Placing will, if implemented, have the following effects:

●    create a more robust and sustainable debt structure:

o  consolidated net debt (including the mark-to-market on interest rate swaps) for the Group will be reduced by approximately £0.6 billion;

o  the consolidated net debt to EBITDA ratio of the Group will improve to approximately 7.7x ;

o  gross securitisation debt of £1,585 million immediately following and as a result of the Restructuring and Firm Placing will have an initial effective interest rate of approximately 7.8 per cent., including PIK interest (approximately 7.1 per cent. excluding PIK interest);

o  cash debt service (cash interest payable and scheduled amortisation of principle) will be reduced by approximately £94 million for the first four quarters following the Closing Date (being the date on which the Restructuring, Firm Placing and Share Consolidation complete); and

o  the next expected refinancing for both Securitisations is not anticipated to be until 2021;

●    preserve the benefits of the Group structure for all stakeholders: both Securitisations will continue to benefit from the material financial and operational synergies, estimated at £25 million per year, which are available to them by virtue of being part of the wider Group; and

●    deliver a materially better position than the alternative of default: the Board believes that the Securitisations' gross debt to EBITDA ratio would be approximately 4x lower by 2018 than under a scenario in which the Restructuring and Firm Placing are not implemented.

The Restructuring and Firm Placing have the support of a broad range of stakeholders that in aggregate own or control c. 56 per cent. of the senior classes of Notes and c. 73 per cent. of the junior classes of Notes across both Securitisations, and c. 54 per cent. of the equity share capital of Punch. These stakeholders include the ABI Special Committee, the Funds (being Alchemy, Angelo, Gordon & Co., Avenue, Luxor, Glenview, Oaktree and Warwick) and funds advised or managed by Seer Capital Management LP. Ambac (the monoline insurer for the Punch A Securitisation) has also agreed to support the Restructuring.

The Funds have informed Punch that they have entered into an agreement with funds managed or advised by Serengeti Asset Management, L.P., Moore Capital Management, L.P. and Bluecrest Capital Management (New York), L.P. (being holders of, in aggregate, 1 per cent. of the senior classes of Notes and 10 per cent. of the junior classes of Notes across both Securitisations), under which those funds have agreed to support the Restructuring and Firm Placing. (These holdings are included in the percentages referred to in the preceding paragraph.)

In order for the Restructuring and Firm Placing to be implemented, it is necessary that:

●    the resolutions to approve the Restructuring and the Firm Placing are passed by Punch's shareholders at the General Meeting. The shareholder resolutions require at least 75 per cent. of the votes cast to be in favour;

●    the resolutions to approve the Restructuring are passed by each class of Noteholders at the Noteholder Meetings. The Noteholder resolutions require at least 75 per cent. of the votes cast at each Noteholder Meeting to be in favour; and

●    the consent of certain other securitisation creditors is obtained. In particular, the proposals will also require the support of each of The Royal Bank of Scotland plc (a liquidity facility provider to the Punch A and Punch B securitisations and provider of hedging arrangements to the Punch A securitisation), Lloyds Bank plc (a liquidity facility provider to the Punch A securitisation), Citibank N.A., London Branch (the provider of hedging arrangements to the Punch B securitisation) and MBIA UK Insurance Limited (the monoline insurer for the Punch B securitisation). Punch has had detailed discussions with these stakeholders over an extended period and will continue the process of securing their support for the proposals on the basis launched today.

Failure to obtain approval for the Restructuring and Firm Placing from shareholders, Noteholders and these other creditors would be expected to lead to near-term default in both Securitisations. Both Securitisations would be in default without the benefit of the current covenant waivers, which are conditional upon a restructuring having been approved by all necessary parties by 14 October 2014 (subject to a 10 business day cure period).

If shareholders and Noteholders do not approve the resolutions necessary to implement the Restructuring and the Firm Placing, or if the other required creditor consents have not been obtained, in each case by 14 October 2014, then, without a further waiver extension (which would be challenging to obtain in the time available), an event of default would be expected to occur in both Securitisations by no later than 28 October 2014.

While the potential implications of a default cannot be predicted with certainty, any default is likely to have material adverse consequences for all stakeholders, but particularly for shareholders, given the various financial and contractual linkages between the Securitisations and the rest of the Group.

3.         The Restructuring

As at 21 June 2014, there was outstanding £1,408 million of gross debt in respect of the Punch A Securitisation and £853 million of gross debt in respect of the Punch B Securitisation.

The principle changes that will be made to the Securitisations are set out below.

Punch A Securitisation

25 per cent. of the outstanding fixed rate senior Notes (the Class A1(R) Notes and Class A2(R) Notes) issued by the Punch A Securitisation will each be extinguished in exchange for two classes of new fixed rate senior Notes (the Class A1(V) Notes and the Class A2(V) Notes, respectively), which will be repaid in bullet repayments on maturity in October 2026 and October 2025, respectively (to the extent they are not prepaid sooner under mandatory prepayment terms requiring excess cash generated by the Punch A Securitisation to be deposited on each Financial Quarter Date into segregated accounts, to be applied variously towards payments of any shortfall in funds available to pay senior debt service and towards prepayments (including amounts ranking in priority thereto) on the Super Senior Hedge Notes, and thereafter the Class A1(V) Notes and Class A2(V) Notes pari passu and pro rata).

The remaining 75 per cent. of the outstanding fixed rate senior Notes (the Class A1(R) Notes and Class A2(R) Notes) will each be redesignated as fixed amortisation Notes (the Class A1(F) Notes and the Class A2(F) Notes, respectively) with a final maturity date of October 2026 and October 2025, respectively, and a fixed amortisation schedule (which may be paid out of excess cash from the Punch A Securitisation only after prepayment in full of the Super Senior Hedge Notes and the Class A1(V) Notes and Class A2(V) Notes).

All of the outstanding junior Notes (the Class M1 Notes, Class M2(N) Notes, Class B1 Notes, Class B2 Notes, Class B3 Notes, Class C(R) Notes and the Class D1 Notes) issued by the Punch A Securitisation will be exchanged, at a specified percentage of their face amount, for a combination of one or more of: (i) cash; (ii) new junior Notes (the Class M3 Notes and Class B4 Notes) issued by Punch Taverns Finance plc (the "Note Issuer"), having different maturities and different rates of interest; and (iii) New Ordinary Shares in Punch. The precise combination of cash, new junior Notes and New Ordinary Shares to be received by the existing Noteholders of the Punch A Securitisation will depend on the class and ranking of their existing Notes as set out below. Where holders of certain junior Notes are entitled to receive New Ordinary Shares in Punch, the relevant Class M1 Notes, Class B1 Notes, Class B2 Notes and Class C(R) Notes (as applicable) shall be acquired by the Borrower in consideration for the procurement by the Borrower of the issuance of such New Ordinary Shares to the relevant Noteholder.

The new Class M3 Notes issued by the Punch A Securitisation will have a maturity date of October 2027, a floating interest rate and no requirement to pay scheduled amortisation, and may be prepaid in whole or in part only after two years from the Closing Date and after the prepayment in full of the Super Senior Hedge Notes and the Class A Notes.

The new Class B4 Notes issued by the Punch A Securitisation will have a maturity date of October 2028 and will have both a cash coupon (of 1.5 per cent. per annum) and a PIK coupon (of 13.50 per cent. per annum, calculated by reference to a compounding formula), rising to 15.0 per cent. per annum if a default stop notice is issued. The Class B4 Notes may be prepaid in whole or in part only after two years from the Closing Date and after the prepayment in full of the Super Senior Hedge Notes, the Class A Notes and the Class M3 Notes.

The Super Senior Hedge Notes, the Class A Notes and the Class M3 Notes will have the benefit of security over the Note Issuer's assets and undertaking as well as a new first-ranking fixed charge over shares in Punch Taverns Holdings Limited and a first-ranking floating charge over the assets and undertaking of a newly incorporated holding company of Punch Taverns Holdings Limited ("Punch A New Holdco 1"). The Class B4 Notes will not benefit from any security over the Note Issuer's assets and undertaking but will benefit from a new first-ranking fixed charge over shares in Punch A New Holdco 1 and a first-ranking floating charge over the assets and undertaking of a newly incorporated holding company ("Punch A New Holdco 2") which will own the shares in Punch A New Holdco 1.

The monoline financial guarantees provided by Ambac for the Punch A Securitisation will be released as part of the Restructuring and Ambac will rebate £20 million to the Note Issuer, which will in turn pay this sum on to the Borrower. The Note Issuer will pay £2.1 million to Ambac in recognition of foregone additional guarantee fees and Punch will also pay £250,000 to Ambac on each of the first and second anniversary of the Closing Date in recognition of foregone additional guarantee fees. Ambac has entered into an escrow arrangement with Punch and with Deutsche Bank AG, London Branch (as escrow agent). The amount becoming due from Ambac on completion of the Restructuring has been paid by it into an escrow account, pending the Closing Date.

The existing interest rate swap transaction relating to the Class M2(N) Notes, the Class B3 Notes and the Class D1 Notes will be partially terminated such that the remaining portion hedges the Class M3 Notes, with all sums due to the hedge provider as a result of such partial termination being set off against the amount advanced by the hedge provider under the Super Senior Hedge Notes. The Super Senior Hedge Notes will mature in July 2021, will bear interest, will be listed, will rank in priority of payment behind the existing hedges and will have no requirement to pay scheduled amortisation, but instead will be required to be prepaid out of excess cash generated by the Punch A Securitisation, with the amount of interest payable on the Super Senior Hedge Notes being determined by reference to the rate of prepayment (measured against a target amortisation profile).

The liquidity facility has been calculated to cover 18 months' peak interest on the Super Senior Hedge Notes, 18 months' peak interest and scheduled redemption (excluding the final payment at maturity) of the Class A1(F) Notes and Class A2(F) Notes, 18 months' peak interest on the Class A1(V) Notes and Class A2(V) Notes and 18 months' peak interest on the Class M3 Notes (with a sub-limit applicable to interest payments on the Class M3 Notes). The precise amount of: (i) the total commitments; and (ii) the M3 sub-limit will be calculated at the Closing Date but are expected, as at the latest practicable date of calculation, to be £135.1 million and £39.6 million, respectively.

The operational covenants of the Punch A Securitisation will be amended to: (i) remove certain restrictions on the disposals of pubs in the Punch A Non-Core Estate and to allow disposals of up to 4 per cent. annually (to be tested by reference to the trailing 24-month EBITDA of pubs in the Punch A Core Estate in any financial year (excluding non-trading periods and making adjustments in respect of EBITDA generated by pubs let on tenancies at will for more than 12 months in such period) (the ''Trading Outlet EBITDA'')) and up to 20 per cent. cumulatively of pubs in the Punch A Core Estate (to be tested on the same basis); (ii) amend the minimum CapEx amount from £1,000 per financial year multiplied by the number of all pubs forming part of the Punch A Estate to £8,000 per pub in the Punch A Core Estate per annum (increasing annually in line with a recognised price index); (iii) introduce a maximum CapEx amount of £17,500 per pub in the Punch A Core Estate per annum (increasing annually in line with a recognised price index); (iv) allow the payment to the Group (including by way of repayment of subordinated debt owed by the Borrower to the Group) of an amount equal to 2 per cent. of annual EBTIDA on satisfaction of certain conditions; (v) allow the appointment of a board observer and the appointment, replacement or removal of board members (subject to certain leverage tests) appointed by the Security Trustee, acting on the instructions of the requisite percentage of Noteholders, in respect of the boards of the Note Issuer and the Borrower; (vi) restrict distributions (including dividends) from the Punch A Securitisation to the rest of the Group other than the payments noted in (iv); (vii) restrict acquisitions other than those funded with the proceeds of a fully subordinated debt and/or an equity contribution and with the approval of not less than 50 per cent. of each class of Notes then outstanding; and (viii) restricting the issue of additional Notes by the Note Issuer other than in order to refinance existing Notes (subject to certain conditions).

In addition, the following financial covenants of the Punch A Securitisation will be amended as summarised in the table below:

Punch B Securitisation

The terms of certain existing senior Notes (the Class A3 Notes, Class A6 Notes and the Class A7 Notes) issued by the Punch B Securitisation will be amended with maturity dates of September 2021, September 2022 and March 2024 respectively, a fixed amortisation profile and with mandatory prepayment terms requiring excess cash generated by the Punch B Securitisation to be deposited on each Financial Quarter Date into segregated accounts to be applied variously towards payments of any shortfall in funds available to pay senior debt service and towards prepayment (including any amounts ranking in priority thereto) of the Super Senior Swap Loan, and thereafter, prepayment of the Class A Notes (beginning with the Class A3 Notes).

One class of the existing senior Notes (the Class A8 Notes) will be prepaid in full in cash on the Closing Date.

All of the outstanding junior Notes (the Class B1 Notes, Class B2 Notes and the Class C1 Notes) issued by the Punch B Securitisation will be exchanged, at a specified percentage of the principal amount outstanding, for a combination of one or more of: (i) new junior Notes (the Class B3 Notes) issued by Punch Taverns Finance B Limited; and (ii) New Ordinary Shares in the Company. The precise combination of new junior Notes and New Ordinary Shares to be received by the existing Noteholders of the Punch B Securitisation will depend on the class and ranking of their existing Notes as set out below:

The Funds (or funds affiliated with them) will, in addition, subscribe for £8.4 million in principal amount of additional Class B3 Notes to be issued for aggregate cash consideration of £7.0 million (such additional Class B3 Notes to be allocated among the Funds in proportion to their respective shareholdings in Punch as at the Closing Date (as adjusted for the shares acquired by them in the Restructuring, Firm Placing and the initial share reallocation described in paragraph 4 below).

The new Class B3 Notes issued by the Punch B Securitisation will have a maturity date of December 2025, a fixed interest rate, no scheduled amortisation and may only be prepaid in whole or in part only after two years from the Closing Date and after the prepayment in full of the Super Senior Swap Loan and the Class A Notes.

All of the Class A Notes will have the benefit of security over the Note Issuer's assets and undertaking as well as a new first-ranking fixed charge over shares in Punch Taverns (PMH) Limited and a first-ranking floating charge over the assets and undertaking of a newly incorporated holding company of Punch Taverns (PMH) Limited (''Punch B New Holdco 1''). The Class B3 Notes will not benefit from any security over the Note Issuer's assets and undertaking but will benefit from a new first-ranking fixed charge over shares in Punch B New HoldCo 1, and a first-ranking floating charge over the assets and undertaking of a newly incorporated holding company which will own the shares in Punch B New Holdco 1 (''Punch B New Holdco 2'').

The monoline financial guarantees provided by MBIA for the Punch B Securitisation will be released.

Existing hedging arrangements relating to the Class A8 Notes and the Class C1 Notes will be terminated in full, with all sums due to the hedge provider as a result of such termination being set off against the amount advanced by the hedge provider under the Super Senior Swap Loan. The Super Senior Swap Loan will bear interest, have a fixed amortisation profile and will be required to be prepaid out of excess cash, but will not have the benefit of any further security or covenants beyond those already provided to the hedge provider under the existing documentation.

The liquidity facility will be resized to cover 18 months of peak interest and scheduled amortisation in respect of each of the Super Senior Swap Loan and the Class A Notes excluding, in each case, the final scheduled repayment of principal. The precise amount of the total commitments will be calculated at the Closing Date, but is expected as at the latest practicable date of calculation to be £88.5 million.

The operational covenants of the Punch B Securitisation will be amended to: (i) remove restrictions on the disposals of pubs in the Punch B Non-Core Estate and to allow disposals of up to 4 per cent. annually (to be tested by reference to the trailing 24-month EBITDA of pubs in the Punch B Core Estate in any financial year (excluding non-trading periods and making adjustments in respect of EBITDA generated by pubs let on tenancies at will for more than 12 months in such period) (the ''Trading Outlet EBITDA'')) and up to 20 per cent. cumulatively of pubs in the Punch B Core Estate (to be tested on the same basis); (ii) amend the minimum CapEx amount from £500 per half year multiplied by the number of all pubs forming part of the Punch B Estate to £8,000 per pub in the Punch B Core Estate per annum (increasing annually in line with a recognised price index); (iii) introduce a maximum CapEx amount of £17,500 per pub in the Punch B Core Estate per annum (increasing annually in line with a recognised price index); (iv) allow the appointment of a board observer appointed and the appointment, replacement or removal of board members (subject to certain leverage tests) appointed by the Security Trustee, acting on the instructions of the requisite percentage of Noteholders, in respect of the boards of the Note Issuer and the Borrower; (v) restrict distributions (including dividends) from the Punch B Securitisation to the rest of the Group; (vi) restrict acquisitions other than those funded with the proceeds of a fully subordinated debt and/or an equity contribution and with the approval of not less than 50 per cent. of each class of Notes then outstanding; and (vii) restricting the issue of additional Notes by the Note Issuer other than in order to refinance existing Notes (subject to certain conditions).

In addition, the following financial covenants of the Punch B Securitisation will be amended as set out in the table below:

4.         The Firm Placing

In connection with the Restructuring, Punch has entered into the Subscription Agreement with the Funds, pursuant to which the Funds have undertaken to subscribe for 1,273,005,000 New Ordinary Shares in aggregate, at a cash subscription price of 3.93 pence per New Ordinary Share, in order to raise £50.0 million (before estimated attributable costs and expenses). This represents a discount of 58.7 per cent. to the closing middle market share price as at 14 August 2014.

The whole of the net proceeds of the Firm Placing (estimated to be £49.8 million after the deduction of estimated total attributable costs and expenses of approximately £230,000 (including irrecoverable VAT)) will be applied in and towards payment of the cash consideration due to the holders of junior Notes in the Restructuring of the Punch A Securitisation.

The New Ordinary Shares to be issued pursuant to the Firm Placing will be allocated as follows:

Shortly after the Closing Date, the following Funds will acquire, in aggregate, 25,814,418 New Ordinary Shares from Avenue Europe at a price of 7.86 pence per New Ordinary Share (subject in each case to the necessary adjustment for the Share Consolidation), as follows:

The Funds have informed the Company that they have entered into an agreement with funds advised by Serengeti Asset Management, L.P., Moore Capital Management, L.P. and Bluecrest Capital Management (New York) L.P. under which those holders have agreed with the Funds to vote in favour of the Restructuring and Firm Placing. Under the agreement, if the Restructuring is completed, a total of 398,544,490 of the New Ordinary Shares to be issued to the Funds pursuant to the Restructuring and Firm Placing will be transferred to those holders in return for those holders paying a certain amount in cash and transferring certain Class M3 Notes to the Funds. As a result of these share transfers, Glenview will dispose of 92,687,107 New Ordinary Shares and acquire £4,186,000 in principal amount of Class M3 Notes and Luxor will dispose of 75,727,826 New Ordinary Shares and acquire £3,420,000 in principal amount of Class M3 Notes. The Company is not aware of the terms of the transfer of the New Ordinary Shares or Class M3 Notes under this agreement, or of any further transfers of New Ordinary Shares and/or Notes to or by the Funds (or any other shareholders or Noteholders) to any other party.

The New Ordinary Shares to be issued pursuant to the Firm Placing will constitute 29 per cent. of Punch's enlarged issued share capital.

No commissions are being paid to the Funds in connection with the Firm Placing.

The Funds have entered into escrow arrangements with Punch and with Deutsche Bank AG, London Branch (as escrow agent). The aggregate subscription amount becoming due by the Funds on completion of the Firm Placing has been paid by them into an escrow account, pending the Closing Date. The Funds have also paid the £7.0 million net amount due from them in respect of the purchase of £8.4 million in principal amount of additional Class B3 Notes into a separate escrow account on substantially similar terms.

5.         Related party transactions

Glenview and Luxor, being two of the seven Funds participating in the Restructuring and Firm Placing, each holds, directly or indirectly, and as at 14 August 2014, more than 10 per cent. of the issued share capital of the Company, and it is expected that each will hold more than 10 per cent. of the issued share capital of the Company immediately following the issue to them of New Ordinary Shares pursuant to the Restructuring and the Firm Placing (assuming that neither of them has since acquired or disposed of (or will, before the New Ordinary Shares are issued pursuant to the Restructuring and Firm Placing, acquire or dispose of) any Existing Ordinary Shares or any existing Notes which carry an entitlement to receive New Ordinary Shares in the Restructuring). Under the Listing Rules, Glenview and Luxor are, therefore, related parties in relation to the Company and, accordingly, their participation in the Restructuring and Firm Placing is a "related party transaction" which requires the approval of the other shareholders under the Listing Rules.

On the basis of the assumption set out above, the tables below set out the interests of Glenview and Luxor in the issued share capital of the Company, and in the Notes issued by each Securitisation, both before and after completion of the Restructuring and Firm Placing, and include the effects of the reallocation of New Ordinary Shares from Avenue Europe described in paragraph 4 above and the disposal of New Ordinary Shares and (where applicable) the acquisition of Class M3 Notes pursuant to the agreement that the Funds have entered into with Serengeti Asset Management, LP, Moore Capital Management, LP and Bluecrest Capital Management (New York) LP. (The effect of the Share Consolidation is not shown, as it will not affect the percentage of the issued share capital of the Company held by them.)

Glenview

Luxor

Glenview and Luxor have undertaken not to vote at the General Meeting (and to take all reasonable steps to ensure that their associates do not vote) on the resolutions necessary to approve, respectively, their own participation in the Restructuring and Firm Placing as a related party transaction.

6.         Effect of the Restructuring, Firm Placing and Share Consolidation on existing shareholders

The New Ordinary Shares to be issued pursuant to the Restructuring and the Firm Placing will constitute 85 per cent. of the enlarged issued share capital of Punch. The holdings of existing shareholders (not acquiring New Ordinary Shares in the Restructuring or the Firm Placing) will, therefore, be significantly diluted.

As a result of the issue of the New Ordinary Shares, it is expected that Punch's "free float" (for the purposes of the Listing Rules), will be reduced from approximately 35 per cent., as at 14 August 2014, to approximately 32.5 per cent. following the Restructuring, Firm Placing and Share Consolidation. Punch has secured certain limited undertakings from the Funds which are intended to mitigate further adverse effects on its free float.

7.         Current trading and full year guidance

Since the Group's trading update on 26 June 2014, which included guidance in respect of underlying EBITDA, trading performance has been in line with management expectations. Trading for the 48 weeks to 19 July 2014 was good, with like-for-like net income in the Core Estate up 1.3 per cent. (based on unaudited management information for the 48 weeks to 19 July 2014). There has been growth in average net income per pub across the Estate during this period. The Group has realised its target of generating £100 million of proceeds from pub disposals, having raised net proceeds of £103 million over the 48 weeks to 19 July 2014.

Provided neither Securitisation defaults, the Board expects to generate underlying EBITDA of between £201.0 million and £209.0 million in respect of the 53 week period ending 23 August 2014.

8.         The Share Consolidation

Punch's share price has adjusted, and may further adjust, in anticipation of the Restructuring and the Firm Placing, by reason principally of: (i) the expected enlargement of Punch's issued share capital pursuant to the Restructuring and the Firm Placing; and (ii) the expected overall reduction in the Group's consolidated net debt.

As at 14 August 2014, Punch's share price was 9.5 pence. The Share Consolidation is being proposed in order to seek to restore the share price to a level that the Board considers to be appropriate. It is proposed to consolidate the Existing Ordinary Shares (including the New Ordinary Shares to be issued pursuant to the Restructuring and the Firm Placing) into Consolidated Ordinary Shares, on the basis of 1 Consolidated Ordinary Share for every 20 Existing Ordinary Shares and New Ordinary Shares.

Immediately before the Share Consolidation becomes effective, Punch will allot and issue up to 100 ordinary shares to the Company Secretary for a subscription price equal to the closing middle market price on the trading day before the date of allotment, in order to ensure that the total number of ordinary shares outstanding immediately before the Share Consolidation becomes effective, divides exactly into the consolidation ratio referred to above.

The Share Consolidation will become effective subject to and immediately following the issue of the New Ordinary Shares pursuant to the Restructuring and the Firm Placing.

Any fractional entitlements arising in respect of the Share Consolidation will be aggregated and sold on behalf of the shareholder entitled to them. The net proceeds (after payment of expenses and any applicable taxes) will be remitted to the relevant shareholder, unless that shareholder would be entitled to less than £3.00, in which case the proceeds will be donated by Punch to the Licensed Trade Charity, a registered charity, together with a matching donation by Punch (capped at £5,000).

9.         Importance of the vote and consequences if the Restructuring and Firm Placing do not proceed

If shareholders and Noteholders do not approve the resolutions necessary to implement the Restructuring and the Firm Placing, or if certain other required stakeholder consents have not been obtained, in each case by 14 October 2014, then, without a further waiver extension (which would be challenging to obtain in the time available), an event of default would be expected to occur in both Securitisations by no later than 28 October 2014.

As explained in Punch's interim results announcement on 15 April 2014, the Securitisations had previously maintained compliance with their DSCR covenants by way of financial support provided by the wider Group through supply arrangements with the Securitisations, or by purchasing outstanding Notes at a discount. However, in the 12 week period ended 7 December 2013, this support ceased and, from that time, the Securitisations have also not repurchased any outstanding Notes.

On 15 April 2014, Punch announced that the DSCR for the two quarters ended 1 March 2014 had fallen below the 1.25x covenant applicable to the Punch A Securitisation, and that although the minimum DSCR covenant level of 1.25x applicable to the Punch B Securitisation had been satisfied, it had reduced to 1.25x, from 1.52x at the previous test date.

On 13 May 2014, Punch announced that the requisite majority of Noteholders and other relevant creditors had acceded to temporary waiver requests in respect of both Securitisations in order to facilitate a consensual Restructuring and delay a possible default. On 26 June 2014, Punch announced that it had convened meetings of Noteholders to be held on 18 July 2014 to approve a further temporary waiver request. On 18 July 2014, the requisite majority of Noteholders and other relevant creditors acceded to further temporary waiver extensions, which will expire at the latest on 19 November 2014.

The occurrence of an event of default would be expected to result in the appointment of an administrative receiver in relation to some or all of the companies in the Group that have granted security in relation to the relevant Securitisation (each an "Obligor"). There can be no certainty as to the course of action an administrative receiver would pursue, but possibilities could include: proposing a restructuring of the Securitisations on different terms; continuing to run the business for the benefit of creditors; disposing of assets to make distributions to creditors in accordance with the priority of their entitlements; or placing the relevant Obligors into liquidation.

Other members of the Group (outside the Securitisations) have certain financial linkages with the Obligors in respect of pension liabilities, real estate liabilities (including guarantees of leasehold liabilities), Group tax assets and tax liabilities, third party indemnities (including to the monoline insurers (guarantors) of certain classes of the Notes) and intercompany loans. If there were to be a default of either Securitisation, certain claims may arise against, and losses may be suffered by, these other members of the Group. In particular, a default by the Punch B Securitisation would be expected to crystallise some of these linkages, including pension liabilities, which in certain circumstances would have a priority claim against the assets of these other Group companies. When combined with existing Group-level liabilities (including external leasehold liabilities), the crystallisation of such linkages following a default of the Punch B Securitisation could generate aggregate liabilities at Group level which could exceed the cash resources available to discharge them. Management services and supply arrangements for the Securitisations are provided or procured at Group level, giving rise to substantial operating synergies that could be lost on termination of these arrangements in the event of a default.

In these circumstances, and depending on the course of action pursued by any administrative receiver, these other members of the Group may be placed into administration shortly following the entry of the Obligors into administrative receivership and it would not be possible for dividends or other distributions to be made to shareholders. In addition, Punch may not recover anything from the Obligors, or from those other members of the Group.

The Board continues to believe that a consensual restructuring is required to avoid a near-term default in the Securitisations, which would be expected to have a material adverse consequences for all stakeholders and, in particular, for shareholders given the various financial and contractual linkages between the Securitisations and the rest of the Group.

The Board has considered all feasible alternatives and has taken a number of important factors into account. These include the recent improvement in trading performance of the Core Estate, progress towards disposal of the Non-Core Estate, the Group's business strategy and operating outlook, the impact of financial and contractual linkages across the Group, the potential implications of a default in one or both of the Securitisations and the absence of sufficient support for alternatives. All of these factors have been critical in the Board's decision to recommend the Restructuring, the Firm Placing and the Share Consolidation.

10.       Recommendation

The Board considers that the Restructuring, the Firm Placing and the Share Consolidation are in the best interests of shareholders as a whole. The Board, which has been so advised by Goldman Sachs, considers the terms on which Glenview and Luxor will participate in the Restructuring and in the Firm Placing to be fair and reasonable so far as shareholders are concerned.

Accordingly, the Board unanimously recommends that shareholders vote in favour of the resolutions to be proposed at the general meeting, as they intend to do in respect of their own beneficial holdings of Existing Ordinary Shares, which as at 14 August 2014 amount to 1,140,892 Existing Ordinary Shares in aggregate, representing approximately 0.172 per cent. of Punch's existing issued share capital.

11.       Expected timetable

The expected timetable for the Restructuring, Firm Placing and Share Consolidation are set out below. If any of the times or dates below change, Punch will give notice of the change by issuing an announcement through a Regulatory Information Service. Details of the revised times and/or dates will also be available on Punch's website www.punchtavernsplc.com

Noteholder Meetings 17 September 2014

General Meeting 17 September 2014

Closing Date 8 October 2014

Forward-looking statements

This announcement includes "forward-looking information" within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. These forward-looking statements are not based on historical facts, but rather reflect Punch's current expectations concerning future results and events and generally may be identified by the use of forward-looking words or phrases such as "believe", "aim", "expect", "anticipate", "intend", "foresee", "forecast", "likely", "should", "planned", "may", "estimated", "potential" or other similar words and phrases. Similarly, statements that describe Punch's objectives, plans or goals are or may be forward-looking statements.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Punch's actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by these forward-looking statements. Although Punch believes that the expectations reflected in these forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct.

Disclaimer

This announcement is not intended to and does not constitute or form part of any offer to sell or invitation to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the proposals set out herein or otherwise, nor shall it (or the fact of its distribution) form the basis of, or be relied on in connection with, any contract therefor or be considered a recommendation that any investor should subscribe for or purchase or invest in any securities.

The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933 as amended (the "Securities Act") or under any U.S. state securities laws and may not be offered or sold within the United States unless any such securities are registered under the Securities Act or an exemption from the registration requirements of the Securities Act and any applicable state laws is available.

Goldman Sachs International, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as financial adviser to Punch and for no one else in connection with the capital restructuring and will not be responsible to anyone other than Punch for providing the protections afforded to clients of Goldman Sachs International nor for providing advice in connection with the capital restructuring, the content of this announcement or any matter referred to herein.

The Blackstone Group International Partners LLP, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting as financial adviser to Punch and for no one else in connection with the capital restructuring and will not be responsible to anyone other than Punch for providing the protections afforded to clients of The Blackstone Group International Partners LLP nor for providing advice in connection with the capital restructuring, the content of this announcement or any matter referred to herein.

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