Distressed investors buy more Punch debt

Oaktree Capital and Angelo, Gordon are among seven junior bondholders which have bought additional Punch debt in a bid to get the deal over the line.

Seven investment managers have bought additional bonds secured against Punch Taverns, the UK’s second largest pub landlord, ahead of a vote to restructure approximately £2.3 billion in debt this month.

Support for the proposed restructuring of the two securitisations backing the group has increased as a result of the purchase and an agreement reached with Morgan Stanley, according to a stock exchange announcement.

Around 72 percent of the notes across Punch A and Punch B and approximately 54 percent of Punch’s share capital support the proposals. For approval, it needs 75 percent consent from each tranche of notes in the securitisation, as well as various other hedge, monoline and liquidity counterparties, including two of the UK’s biggest state banks Royal Bank of Scotland and Lloyd’s Bank.

Increased support is in part an effect of seven holders of junior classes of notes across Punch A and Punch B purchasing Class B3 notes from the Punch A notes. These funds include investment funds managed by or advised by Alchemy Special Opportunities, Avenue Europe International Management, Angelo, Gordon (or AG Funds), Glenview Capital Management, Luxor Capital Group, Oaktree Capital Management and Warwick Capital Partners. Glenview, Luxor, Avenue and Angelo are also shareholders.

Another agreement has been reached by the funds with funds managed or advised by Serengeti Asset Management, Moore Capital Management and Bluecrest Capital Management.

The agreements are the latest examples which show that investors in the junior bonds and the equity of Punch’s capital structure are now driving proceedings to get enough support for the vote on the restructuring proposals, set for 17 September 2014.

A quirk in the securitisation documents by which the liquidity providers RBS and Lloyds must make coupon payments to the junior noteholders in the event of default, was one of the key hurdles in agreeing final terms in the turbulent and nigh two-year restructuring talks.