Newspaper article The Evening Standard (London, England)

No Cheers for Punch as Share Price Plummets

Newspaper article The Evening Standard (London, England)

No Cheers for Punch as Share Price Plummets

Article excerpt


CITY slurpers reckon Punch Taverns has all the investment allure of theslops tray in a busy pub these days.

Shares in the UKs biggest pub-chain operator slumped 231/2p to a near-five-yearlow of 3141/2p today, with one follower of the company claiming it may be closeto breaching its banking covenants.

The independent research specialist Redburn has a sell note on the shares andsays Punch is the company giving it most concern as the economy threatens toslide into recession.

Redburn warns that if it does, Punch will probably trip all three restrictedpayment clauses, thereby denying the company and shareholders accesses to anyavailable cash.

It is also possible that even if the economy does not slip into recession,Punch will trip the default covenant on its B bond structure in late 2009 orearly 2010.

Redburn sees little alternative for Punch other than to call upon itsshareholders for extra funds. It is forecasting a three-for-two rights issue at310p by early 2010. It says this is not something said lightly or withoutconsiderable homework.

Punch has been hard hit by the smoking ban and slowdown in consumer spending,which has resulted in a slump in beer sales.

Attempts earlier this year to merge part of its business with that of rivalMitchells & Butlers came to nothing, and Punch ruled out the prospect ofconverting some of its property portfolio into a real estate investment trustfor tax purposes.

Shares generally slammed into reverse following an early mark-up. In thintrading conditions, the FTSE 100 index fell 68.9 to 5598.3.

Retailers suffered some of the biggest falls after digesting more bad newsabout the housing market where new mortgage approvals have slumped 20%. Nextdropped 311/2p to 9631/2p, Tesco 10.8p to 367.2p, Kesa Electrical 13p to1611/2p and DSG International 31/2p to 43p. …

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