Punch Taverns published the results of its much-anticipated strategic review this morning (22 March). The proposal will reduce Punch's leased estate from around 5,200 pubs to 3,000 and see Spirit demerged from the business as a separate unit of managed pubs.

The smaller group of 3,000 pubs currently generates around 75% of the leased estate's EBITDA and has net income per pub of around £80,000. Meanwhile, Spirit could convert somewhere between 100 to 150 pubs from leased to managed on an ROI of 25%.

ABS analysts at Barclays Capital believe the announcement is supportive of all three of Punch's securitisations. Spirit will receive around half of the Plc cash after transaction costs of £30m, while Punch A and B will continue to be supported by the group as it begins discussions with bondholders.

The Barcap analysts note that the group's continued support of Punch A and B appears to signal a lack of appetite for confrontation with bondholders, who have recently been presenting Punch with a united front in anticipation of this review (see SCI 3 March). They add that focus is now likely to shift on securing concessions from bondholders in return for the group's ongoing support.

Gaining bondholder approval for non-core asset disposals is likely to be straightforward. Waiving covenants, on the other hand, is expected to be far harder for the group to achieve.

JL