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Punch faces up to its biggest ever test

By Burton Mail  |  Posted: August 26, 2014

By Rob Smyth

  • Punch Tavern's offices, Wellington Road.

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THE name Punch Taverns is now constantly linked with words like 'restructure' and 'debt'.

The Centrum 100- based firm has had a tough time in recent years – all linked to efforts to try to unburden itself from a £2.3 billion debt pile.

The company, as people see it today, sprung into life in August 2011 after a demerger took place which split the then Punch Taverns into two separate firms – Punch and Spirit.

Five hundred staff were assigned to Spirit at Sunrise House in Wellington Road, while 450 staff went to Punch across the street at Jubilee House.

The firm was forced to make the move after Punch built up a large debt pile through a series of acquisitions during the credit boom, including the purchase of Spirit in 2005 for £2.68 billion.

The company has its roots in one of Burton's most iconic names, having been founded in 1997 by Hugh Osmond and Roger Myers, after they bought the portfolio of pubs owned by brewing giant Bass.

For the bulk of its existence to date, the hand on the tiller at Punch was that of Giles Thorley, who joined the company as executive chairman in December 2001, overseeing the company's move from Fradley Park to new headquarters on Burton's Centrum 100 business park.

In 2002, the company was cleaved in two, with its managed pub businesses given over to the newly-created Spirit Group, which established a base at the former Ind Coope Burton Brewery headquarters in Station Street.

The two halves were reunited in December 2005 when Mr Thorley, by now chief executive, guided Punch into a reacquisition of Spirit Group to create the UK's biggest pub company.

Mr Thorley was never far from controversy.

In March 2004, he pocketed a £3.6 million shares bonus by exercising 1.5 million Punch shares, while in November 2006 the Mail revealed that he had made nearly £11 million in a year in which the firm had axed dozens of staff.

A closer look at the firm's balance sheet showed that action needed to be taken and the firm decided to separate its leased and managed pub operations once again, with the latter division resurrecting the old Spirit name.

In 2012, the firm announced that it was working through a massive restructure after 'previously recognising that the long-term future was not sustainable'.

As well as moving to restructure the firm's finances, the company also started to dispose of thousands of under-performing pubs.

A review of the firm's capital structure revealed it had 'too much debt' and the cost of servicing it was hurting the business.

The firm was set to implement a company restructure in June 2013. However, several issues have seen proposals face delay after delay, so much so that the firm is still trying to implement the structure now in a bid to stave off a default on its debt.

As trials and tribulations surrounded the firm, its share price dropped from 1,379p in 2007 to 9p this month.

The firm has recently announced plans for its final attempt to launch a restructure.

It will see a debt for equity swap put in place to try to help the firm battle against its mountains of debt.

Stephen Billingham, Punch executive chairman, said: "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 work.

"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."

What is at stake is perfectly clear.

Hundreds of pubs, thousands of jobs and a well-established firm.

Now, everyone associated with Punch has to do everything they can to ensure the firm is saved from the brink of oblivion.

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