Punch Taverns shares continue to fall over debt fears
8 July, 2008

By Hamish Champ

Slide comes despite upbeat message to analysts

Punch Taverns shares fell nearly seven per cent this morning, wiping out gains made after yesterdays debt update with City pub watchers.

Pressure on the groups shares had been temporarily lifted yesterday as Punch met with analysts to bring the City up to speed with a number of finance-related issues, including its debt situation and progress on becoming a real estate investment trust (REIT).

The pubco told the gathering that its balance sheet was well structured and strong, according to Blue Oar Securities Mark Brumby, and was no more indebted than a number of its peers. It also told analysts its dividend was safe.

The meeting was held on the day the groups interim management statement (IMS) had been originally due out. The IMS was actually released two weeks ago, after speculation surrounding Punchs debt situation sent the groups shares tumbling.

At yesterdays meeting Punch chief executive Giles Thorley repeated his assertion that the group did not need a rights issue, while any breaching of one of its debt instruments, Punch A, would have no impact and any lockdown of cash held within it would not be permanent.

Meanwhile the cost of Punch becoming a REIT would be at least 260m, Thorley told analysts. Blue Oars Brumby said the undertone seemed to be that a conversion did not make sense at present.

Another analyst who attended the meeting yesterday took a sanguine view of the outcome and Punchs debt situation. It would take a dramatic fall in profits to affect the dent position. Theyre fine as long a trading doesnt collapse, he said.

The City meeting came as Punch confirmed the departure of Spirit Group managing director Andrew knight and his successor, ex-Whitbread executive Michael Tye.

Punch acknowledged that Spirits trading in the last six months had not been as robust as it had hoped and signalled that it believed Tye would turn things around across the estate.

Declining beer sales and a series of negative broker notes have pushed Enterprise Inns' value down by over 60 percent this year.