More bad news for pubs group Punch Taverns.
Yesterday analyst Jamie Rollo of Morgan Stanley said the company's shares could be worth as little as 5p in the worst case, although if trading recovered they could reach 110p.
Today Seymour Pierce has issued a sell note, pointing out potential problems for the company if US bond insurer Ambac filed for bankruptcy, as had been suggested earlier this week. Seymour Pierce analyst Hugh-Guy Lorriman said Ambac insured a substantial proportion of the higher rated debt within Punch's securitisations. He added:
The implication of the (potential) bankruptcy of Ambac is unclear but could be material for stakeholders in Punch Taverns. It may be that the responsibility of Ambac as insurer passes to another body which is more active in protecting its interests. It may be that the insurance simply disappears and that the immediate result is the downgrading of the underlying Punch debt by rating agencies. This will precipitate the discussion between debt representatives and other (especially equity) representatives.
What is the likely result of this? Either (1) debt holders demand additional equity injection to prevent longer term default probability or (2) debt holders agree on some form of 'haircut', or, as per 2009, sell out at a significant discount.
The situation is volatile and remains high risk. We remain sellers.
Punch's shares have dipped 0.05p to 69p.
