Financial News

Punch Taverns (LSE: PUB.L - news) has narrowly survived a protest vote against its plans to raise £375m in a share sale.

The pub operator, which launched the cash call last month to repair its debt-laden balance sheet, needed at least 75 per cent of shareholders who voted to approve the fundraising.

Punch said that 75.1 per cent of votes cast were in favour of the share placing.

Greenlight Capital and QVT Financial were among those who voted against the plan. The two US hedge funds, which hold a combined stake of 13 per cent in the company, are said to have wanted Punch to launch a smaller, less dilutive share issue.

Under the structure of the proposed placing, existing shareholders would end up owning only 42 per cent of Punch.

One of the dissenting shareholders took issue with the fact that Punch would pay 95p to the pound to retire the remainder of the £215m convertible bond that matures next year. "While it makes sense to raise cash and pay off [debt], the size of the issue is questionable," said a person familiar with the situation. "I don't see the point of raising such a huge amount of cash and diluting existing shareholders if you are not buying back debt at a huge discount."

That person also believed that the strategy of selling pubs remained a viable way for Punch to cut its £4.4bn debt pile.

Punch has sold 331 outlets this fiscal year and at the time of the cash call argued that the share offering was a better alternative to selling pubs cheaply. firesale prices

About half of Punch is currently owned by five US investor groups, and a high proportion of these are holders of derivative contracts, such as total return swaps and contracts for difference, which prevents the controlling party from voting. As a result, only 53 per cent of eligible votes were cast.

Punch said that existing shareholders would take up 49 per cent of the offer with the balance of the issue being placed with mainly UK-based institutions.