Financial News

LONDON (ShareCast) - Punch Taverns (LSE: PUB.L - news) will raise approximately £350m through a placing and open offer and intends to make a tender offer to purchase its outstanding convertible bonds.

The group also said trading results for the 40 weeks to May reflects the challenging market conditions being faced by the sector. "Although we anticipate that demand levels are unlikely to improve in the near term, we are on track to meet our expectations for the financial year," it said.

The new ordinary shares will be issued at the offer price determined by a market book build process.

Part of the net proceeds will be used to buyback a share of the £275m convertible bonds, which it issued in 2006 to buy Spirit Group, at a purchase price of not less than 95%. The balance of the proceeds will be used for the general corporate purposes, including selective repurchases of securitisation notes.

The group, which is trying to bring down its mountain of debt, said the fundraising is an attractive alternative to disposing core pubs at lower prices. Punch has been undertaking a series of pub disposals, which have amounted to £171m so far this year, to reduce debt.

"Today's announcements are a clear sign to the market, our partners, our customers and our employees of Punch's ability and determination to move beyond the current challenging market conditions, to focus on fundamentals and continue to drive operational change through the business to deliver long term shareholder value," said chief executive Giles Thorley.

The group said trading performance in the third quarter of the financial year shows early indications that its actions to stabilise performance are seeing some success.

Like for like EBITDA at its leased estate were down 11.2%. At its managed estate, like for like sales were down by 1.2%, continuing the improving trend across the year with third quarter sales being 1.0% up on the same period of last year.

Improved trading during March and April benefited from softer comparatives, principally due to a later Easter this year and a poor, early Easter last year. Trading during May has been more mixed given tougher, weather driven comparatives a year ago, it said.

"While we are confident of the longer term prospects for the Group and our expectations for the full year remain unchanged, we remain very cautious over the near-term due to the lack of forward visibility on trading outlook," added the group.