Punch Taverns announced last week that fixed rate noteholders in Pubmaster Finance Limited would be requested to vote on a restructuring package ahead of a bondholder meeting scheduled for July 25, 2005. The securitization would be increased to GBP3.04 billion ($5.29 billion) in size, to incorporate an additional 663 pubs, including 471 retained from the InnSpired Group acquisition and the removal of 400 lower profit pubs providing approximately GBP150 million of cash.

The refinancing involves the early redemption of all existing floating-rate notes, totaling GBP259 million, and the issuance of an additional GBP625 million of notes offered in three tranches. The class A7 and A8 notes will be backed by a full MBIA wrap. The class B notes are expected to be upgraded to triple-B plus as a result of the introduction a subordinate class C tranche and the improvement of the covenant package. The proposed covenant changes will bring Pubmaster Finance Limited in line with the present ratings of Punch Taverns Finance Securitization.

Analysts at The Royal Bank of Scotland estimated that Punch's refinancing of the Pubmaster transaction could leave Punch with as much as GBP700 million (including debt) in its acquisition portfolio. "There is little doubt that Spirit is considering all options, with a break-up now looking increasingly likely," said analysts at the RBS. "Such a break-up is likely to be undertaken by its current owners to ensure maximum return and the highest number of potential bidders. We expect the core, high quality (and higher EBITDA per pub) managed outlets would probably be transferred to a single purchaser with the Spirit Issuer transaction in place, probably with some of the floating-rate notes paid down."

RBS said that it did not foresee the redemption of fixed-rate notes in the Spirit Issuer transaction but said that holders of the floating rate notes in the transactions should be mindful of possible redemption.

On a Fitch Ratings-hosted teleconference reviewing recent activity in the U.K. pub sector, Fitch analyst Philip Walsh reported that the rating agency recently spoke at a UBS-sponsored pub seminar where Punch Taverns, Greene King and Mitchell & Butler spoke positively about their respective securitization programs. Fitch made a presentation on the role of the rating agency in these transactions and stressed that in the event a ratings confirmation is requested, such as in a refinancing, the agency is not required to address any credit issues.

"The question we ask is: will these changes affect your credit ratings? Provided the answer is no, then the trustee can typically authorize the changes," said Walsh. "We wanted to make it clear that we are not required to confirm that the changes that are being requested are actually in accordance to documentation - that is the trustee's role."

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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