Restructuring update

Enquiries:Punch Taverns plc

Tel: 01283 501 948

Stephen Billingham, Executive Chairman

Steve Dando, Finance Director

Brunswick

Tel: 020 7404 5959

Jonathan Glass, Mike Smith

A. Overview

1. Summary

75% of Class A Notes reinstated as fixed amortisation notes with an amortisation profile targeting 1.3x FCF DSCR in FY15-FY17 inclusive and 1.2x FCF DSCR thereafter.

25% of Class A Notes exchanged for new variable amortisation notes.

Class M1, B1, B2 and C(R) Notes extinguished at a discount to par (or at par, in the case of the Class M1 Notes only), for a combination of (i) 22.4% cash, (ii) 45.1% new Class M3 Notes, (iii) 14.3% new Class B4 Notes, and (iv) 18.2% ordinary shares in Punch Taverns plc ("Plc Equity").

Class M2, B3 and D1 Notes extinguished at a discount to par for a combination of (i) 40.6% cash, (ii) 45.1% new Class M3 Notes and (iii) 14.3% new Class B4 Notes.

Outstanding hedge in respect of Class M2 Notes partially terminated, with remainder re-allocated to new Class M3 Notes and the tenor amended to match that of the Class M3 Notes. Outstanding hedges in respect of Class B3 and D1 Notes terminated in full.

Break costs payable in respect of terminated hedges to be settled by issuance of Super Senior Swap Note.

In each of FY15-17 inclusive, up to £12.5m pa[3] of Excess Cash to be applied on each Interest Payment Date to fund a Debt Service Reserve Account ("DSRA") for Class A Notes up to a maximum of £20m (cumulative).

Firm placing of £50m of equity in Punch Taverns plc to specified existing parties as set out in section 19 below, at 3.81 pence per share to raise additional funds to be applied to partially repay Class M-D Notes.

B. Restructuring Terms

2. Voting Fee

10bps Voting Fee payable to any noteholder who votes on the transaction (either in favour or against).

Payment of voting fee will be conditional upon the implementation of the full transaction (i.e. restructuring of both Punch A and Punch B securitisations).

3. Conditions

Restructuring of Punch A and Punch B securitisations to be inter-conditional.

Agreement of satisfactory definitive documentation.

Implementation of the restructuring to be conditional upon obtaining all necessary shareholder approvals in connection with (i) debt for equity swap, (ii) firm placing, (iii) related party transactions and (iv) whitewash procedure under Takeover Code.

C. Sources and Uses of Cash

4. Sources

(i) Cash on balance sheet, net of fees and expenses:

(ii) Group cash resources (including £20.0m contribution from monoline financial guarantor):

(iii) Net proceeds of firm placing:

Total:

£125m

£70m

£50m

£245m

5. Uses

(i) Repayment in part of Class M-D Notes, as described in section D below:

(ii) Cash retained on balance sheet:

Total:

£230m

£15m

£245.0m

D. Existing Capital Structure

6. Class A Notes

75% of Class A Notes reinstated as Class A Fixed Notes.

25% of Class A Notes reinstated as Class A Variable Notes.

7. Class M1 Notes

Class M1 Notes to be exchanged at 100.0% of par, comprising:

(i) 22.4% cash

(ii) 45.1% new Class M3 Notes

(iii) 14.3% new Class B4 Notes

(iv) 18.2% Plc Equity

8. Class M2 Notes

Class M2 Notes to be exchanged at 90.0% of par, comprising:

(i) 40.6% cash

(ii) 45.1% new Class M3 Notes

(iii) 14.3% new Class B4 Notes

9. Class B1 Notes

Class B1 Notes to be exchanged at 62.5% of par, comprising:

(i) 22.4% cash

(ii) 45.1% new Class M3 Notes

(iii) 14.3% new Class B4 Notes

(iv) 18.2% Plc Equity

10. Class B2 Notes

Class B2 Notes to be exchanged at 62.5% of par, comprising:

(i) 22.4% cash

(ii) 45.1% new Class M3 Notes

(iii) 14.3% new Class B4 Notes

(iv) 18.2% Plc Equity

11. Class B3 Notes

Class B3 Notes to be exchanged at 57.5% of par, comprising:

(i) 40.6% cash

(ii) 45.1% new Class M3 Notes

(iii) 14.3% new Class B4 Notes

12. Class C Notes

Class C Notes to be exchanged at 25.0% of par, comprising:

(i) 22.4% cash

(ii) 45.1% new Class M3 Notes

(iii) 14.3% new Class B4 Notes

(iv) 18.2% Plc Equity

13. Class D1 Notes

Class D1 Notes to be exchanged at 12.0% of par, comprising:

(i) 40.6% cash

(ii) 45.1% new Class M3 Notes

(iii) 14.3% new Class B4 Notes

E. Revised Capital Structure

14. Super Senior Swap Note

Quantum of Super Senior Swap Note to be calculated at transaction close based on the costs of breaking a proportion of the hedges on the existing Class M2 Notes, Class B3 Notes and Class D1 Notes as described in section I below estimated to be in the region of c. £110m. Super Senior Swap Note to have legal final maturity in 2021.

In each of FY15-17 inclusive:

(a) For so long as funds available under the DSRA are less than £20m, £12.5m[4] pa of Excess Cash to be applied to fund a DSRA up to a maximum of £20m (cumulative), then the remaining Excess Cash applied in mandatory prepayment of Super Senior Swap Note

(b) For so long as funds available under the DSRA are no less than £20m, 100% of Excess Cash to be applied on each Interest Payment Date in mandatory prepayment of Super Senior Swap Note (see section G below).

50% of funds available under the DSRA to be applied towards mandatory prepayment of Super Senior Swap Note on the first Interest Payment Date where net leverage through the A Notes (incl. swap MtM) is below 3.50x and the remaining 50% of funds available under the DSRA to be similarly applied where such net leverage is below 2.50x.

From FY18 onwards, 100% of Excess Cash to be applied on each Interest Payment Date in mandatory prepayment of Super Senior Swap Note.

15. Class A Fixed Notes (Class A(F) Notes)

Total of £202.5m Class A1(F) Notes to be reinstated based on the allocations above.

Total of £137.4m Class A2 (F) Notes to be reinstated based on the allocations above.

Class A Fixed Notes subject to a fixed amortisation schedule targeting a 1.3x FCF DSCR in FY15-FY17 inclusive and a 1.2x FCF DSCR thereafter.

Class A1(F) Notes final maturity in 2026.

Class A2(F) Notes final maturity in 2026.

Any optional redemptions of Class A(F) Notes to be made at modified spens (G+100bps).

16. New Class A Variable Notes (Class A(V) Notes)

Total of £67.5m new Class A1(V) Notes to be issued based on the allocations above.

Total of £45.8m Class A2(V) Notes to be issued based on the allocations above.

Class A Variable Notes to have no fixed amortisation schedule, but must be prepaid at modified spens (G + 100bps) using a proportion of excess cash (described in section G below) or repurchased in the market using excess cash at Punch's election.

Class A1(V) Notes final maturity in 2026.

Class A2(V) Notes final maturity in 2026.

Class A Variable Notes to be subordinated to Class A Fixed Notes.

17. New Class M3 Notes

Total of £300m new Class M3 Notes to be issued based on the allocations above.

Class M3 Notes to be subordinated to Class A Notes and rank in priority to new Class B4 Notes.

Class M3 Notes final bullet maturity in 2027.

Non-call period of 2 years from closing. Thereafter, optional redemption at par plus accrued interest.

Ability to refinance Class M3 notes following non-call, subject to permitted financing criteria as follows: (i) no new indebtedness senior to or pari passu with the Class M3 Notes may be incurred whilst any Class M3 Notes are outstanding, and (ii) no cash from securitisation balance sheet can be used for such a refinancing until the Super Senior Swap Notes and the Class A Notes are repaid.

Any new indebtedness subordinated to the M3 Notes may only be issued if the total cash debt service costs of the Punch A securitisation following the issuance of such indebtedness is no higher than the pre-issuance cash debt service costs (and on no worse terms than existing from a Class A and M3 perspective).

18. New Class B4 Notes

Total of £95m new Class B4 Notes to be issued based on the allocations above.

Class B4 Notes to be unsecured and uncovenanted, and to be subordinated to all Issuer Secured Creditors.

Class B4 Notes have a first priority share pledge granted over Punch A (PTH) equity (such share pledge being structurally subordinated to the Class A and Class M3 share pledge granted by PTH over a new holding company for the Punch A securitisation group).

Ability to enforce subject to following conditions: 180-day standstill period or Class A notes have been accelerated.

Class B4 notes to benefit from a 28 day standstill of enforcement of security by senior noteholders. During the standstill period the holders of the Class B4 notes have the option to buy Class A/M3s at par plus accrued interest plus any contractual modified spens payments.

Class B4 Notes final bullet maturity in 2028.

Non-call period of 2 years from closing. Thereafter, optional redemption at par plus accrued interest.

 Optional prepayment of Class B4 Notes permitted following non-call period if (i) Class A Notes and Class M Notes have been repaid in full or (ii) redemption is funded out of the proceeds of an equity issuance; or (iii) indebtedness issued to repay or prepay the Class B4 Notes is subordinated to the Class M3 Notes and the total cash debt service costs of the Punch A securitisation following the issuance of such indebtedness is no higher than the pre-issuance cash debt service costs, provided no cash from securitisation balance sheet can be used for such a refinancing until the Super Senior Swap Notes and the Class A Notes are repaid (and such new indebtedness is on no worse terms than existing from a Class A and M3 perspective). Angelo Gordon and Oaktree will provide a cash alternative at par for any B4 Noteholders wishing to take cash rather than B4 Notes

19. Equity

£40m of recoveries to holders of Class M, B and C Notes (based on the allocations above) converted to New Plc equity, with total number of shares to be allocated based on a fixed price of 7.62 pence per share.

Firm placing of £50m of equity in Punch Taverns plc at 3.81 pence per share to be allocated between funds managed by the following institutions:

(i) Alchemy Partners LLP

(ii) Avenue Europe Management LLP

(iii) Angelo Gordon Europe LLP

(iv) Glenview Capital Management LLC

(v) Luxor Capital Group LP

(vi) Oaktree Capital Management (UK) LLP

(vii) Warwick Capital Partners LLP

The proceeds of the firm placing will be applied to partially repay Class M-D Notes.

Following implementation of the transaction, Punch Taverns plc issued share capital will be divided approximately as follows:

No. of shares

%

Existing Shareholders

666m

15.0%

Plc Equity issued to Class M-D Noteholders

530m

11.9%

Plc Equity issued to junior noteholders in Punch B securitisation

1,931m

43.5%

Plc Equity issued as part of firm placing

1,312m

29.6%

Total

4,438m

100%

20. Monoline Financial Guarantees

Monoline financial guarantees on Class A2 Notes, Class M2 Notes and Class B3 Notes to be released as a condition of the restructuring.

Coupons on Class A2 (F) Notes and Class A2(V) Notes to be increased by 50bps to reflect the guarantee fee which would otherwise have been payable to Ambac.

Ambac to make a contribution of £20.0m in cash to the restructuring, and to confirm that it will not be entitled to any contractual make-whole payment (which would otherwise amount to c. £3.1m).

21. Coupons

(i) Super Senior Swap Note:

(ii) Class A1(F) Notes:

(iii) Class A2(F) Notes:

(iv) Class A1(V) Notes:

(v) Class A2(V) Notes:

(vi) Class M3 Notes:

(vii) Class B4 Notes:

Libor

7.274%

7.32% (includes 50bps previously payable as a guarantee fee)

7.274%

7.32% (includes 50bps previously payable as a guarantee fee)

Libor + 550bps

1.50% cash pay plus13.5% PIK

PIK coupon to accrue quarterly (but based on annual PIK rate stated above)

Cash coupon through to maturity on Class B4 Notes subject to stop notice on default.

In the event stop notice is issued on Class B4 Notes cash coupon payment, coupon will convert to 15.0% PIK. with no cash coupon

F. Security and Subordination

22. Subordination

Notes rank in the following order of priority and point of security:

(i) first, Super Senior Swap Note;

(ii) second, pari passu, Class A1(F) Notes and Class A2(F) Notes;

(iii) third, pari-passu, Class A1(V) Notes and Class A2(V) Notes;

(iv) fourth, Class M3 Notes; and

(v) fifth, Class B4 Notes (unsecured).

23. Super Senior Swap Note, Class A Notes and Class M3 Notes

Full security and covenant package on existing terms.

Super Senior Swap Note will not benefit from additional covenants, security or protections beyond those afforded to the Swap Provider under the existing documentation.

24. Class B4 Notes

No security or covenant protection at Issuer level. Class B4 notes to benefit from share pledge as set out in section 20 herein and from a 28 day standstill of enforcement of security by senior noteholders. During the standstill period the holders of the Class B4 notes have the option to buy Class A/M3s at par plus accrued.

25. Debt Release

Transaction documents to be amended to provide for the ability to release all outstanding debt following enforcement of first priority share pledge over Punch Taverns Holdings Limited shares and application of proceeds pursuant to post-enforcement waterfall.

G. Prepayments

26. Excess Cash

Excess cash within the Punch A securitisation (after paying permitted costs and expenses, retention of up to £15m cash reserve and the DSRA and payment of Group service fee (if any)) to be applied in mandatory prepayment in the order provided for in the Prepayments Waterfall.

27. Prepayments Waterfall

In each of FY15-17 inclusive, Excess Cash to be applied on each Interest Payment Date in the following manner:

(i) first, to repay the Super Senior Swap Note and fund the DSRA as per below:

(a) For so long as funds available under the DSRA are less than £20m, up to £12.5m[5] pa of Excess Cash applied to fund a DSRA up to a maximum of £20m (cumulative), then the remaining Excess Cash applied in mandatory prepayment of Super Senior Swap Note

(b) For so long as funds available under the DSRA are no less than £20m, 100% of Excess Cash to be applied on each Interest Payment Date in mandatory prepayment of Super Senior Swap Note.

(ii) second, either to prepay the Class A(V) Notes pro rata between Class A1(V) Notes and Class A2(V) Notes or, at Punch's election, to buy back Class A(V) Notes in the market and surrender them for cancellation; and

(iii) third, at Punch's election, to be retained for future debt service in respect of the Class A(F) Notes, to buy-back Class A Notes in the market and surrender them for cancellation, or to make voluntary prepayments according to the following order of priority:

(a) first, to prepay Class A(F) Notes until repaid in full;

(b) second, to prepay Class M3 Notes until repaid in full; and

(c) third, to prepay Class B4 Notes.

From FY18 (inclusive), Excess Cash to be applied on each Interest Payment Date:

(i) first, to repay the Super Senior Swap Note;

(ii) second, either to prepay the Class A(V) Notes pro rata between Class A1(V) Notes and Class A2(V) Notes or, at Punch's election, to buy back Class A(V) Notes in the market and surrender them for cancellation; and

(iii) third, at Punch's election, to be retained for future debt service in respect of the Class A(F) Notes, to buy-back Class A Notes in the market and surrender them for cancellation, or to make voluntary prepayments according to the following order of priority:

(a) first, to prepay Class A(F) Notes until repaid in full;

(b) second, to prepay Class M3 Notes until repaid in full; and

(c) third, to prepay Class B4 Notes.

All optional prepayments to be made at the optional redemption amounts set out in section E above.

H. Liquidity Facility

28. Commitment

Liquidity facility commitment resized on the closing date to provide for:

(i) 18 months' peak principal and interest on Class A Notes (excluding any final maturity bullet repayments);

(ii) 18 months' peak interest in respect of the Super Senior Swap Note and Class M3 Notes estimated as at the closing date;

Sub-limit of liquidity facility commitment applicable to Class M3 Notes capped at an amount equal to 18 months' peak interest calculated at closing.

Commitments to be resized on a quarterly basis.

29. Sub-limits

Amount capable of being drawn at any time to be equal to the lower of:

(i) the then applicable liquidity facility commitment; and

(ii) in the case of:

(a) the Class A Notes, the actual next 18 months' principal and interest; and

(b) the Class M Notes and the Super Senior Swap Note, the estimated next 18 months' interest.

Sub-limits to be resized on a quarterly basis.

30. Term

Liquidity facility to expire upon repayment in full of the Super Senior Swap Note, the Class A Notes and the Class M Notes.

31. Ratings Triggers

Minimum liquidity facility provider rating of BBB.

Current standby drawings to be returned to liquidity facility providers who meet the revised minimum liquidity facility provider rating at closing.

32. Margin and Fees

(i) Commitment Fee:

(ii) Drawn Margin:

(iii) Standby Drawn Margin:

N/A

210bps

N/A

33. CPs to Liquidity Facility Drawings

As a CP to any drawing under the Liquidity Facility, the Issuer must provide a director's certificate confirming that any additional drawings under the Liquidity Facility are projected to be repaid based on Issuer's forecasts.

I. Hedge Contracts

34. M2 Hedge

Hedge on cancelled Class M2 Notes will be reallocated to new Class M3 Notes.

Tenor of M2 Hedge will be amended to match the maturity of the underlying Class M3 Notes, and the overhedge will be terminated at closing.

The break costs crystallised as a result of the reduction in notional amount of the swap and shortening of the tenor will be settled by the issuance of the Super Senior Swap Note. The MtM to determine the break costs will be calculated at closing.

No other changes will be made to the notional profile or to the fixed/floating rates.

35. B3 Hedge and D1 Hedge

Hedges on cancelled Class B3 Notes and Class D1 Notes will be terminated in full at closing.

The break costs crystallised as a result of the cancellation will be settled by the issuance of the Super Senior Swap Note. The MtM to determine the break costs will be calculated at closing.

36. Ongoing Hedging Requirements

Subject to the below, to prevent over-hedging as a result of the prepayment or early redemption of the Class M3 Notes, any outstanding hedges will be terminated pro-rata to the extent that the Class M3 Notes are prepaid.

Entry into new hedges shall be permitted to the extent of any under-hedging, subject only to the existing ratings test and new hedges ranking pari passu with existing hedge.

Hedge to be capable of being transferred to any new floating rate notes issued to refinance the Class M3 notes.

37. Hedge Counterparty Minimum Rating

Day 1 counterparty minimum credit rating of BBB+.

No ongoing hedge rating requirement.

J. Financial Covenants

38. FCF DSCR

Free Cash Flow: EBITDA set at 1.0x.

39. EBITDA ICR

EBITDA: Debt Service (excl. fixed amortisation and prepayments from Excess cash) set at 1.25x and subject to ratchet up to 1.70x in Q4 2022.

40. Net Senior Leverage (through the A Notes)

Net Senior leverage covenant (through the A Notes, including Super Senior Swap Note and excluding swap MtM) set to the higher of:

(i) 20% headroom to business plan EBITDA in Year 1; 17.5% headroom to business plan EBITDA in Year 2; 15% headroom to business plan EBITDA thereafter

(ii) 3.0x

41. Net Leverage (through the M3 Note)

Net leverage covenant (through the M3 Notes, including Super Senior Swap Note and A Notes but excluding swap MtM) set to the higher of:

(i) 25% headroom to business plan EBITDA

(ii) 4.5x

42. Net Worth

Minimum net worth of £50 million.

43. Financial Covenant Testing

All financial covenants to be tested quarterly on a rolling 4Q basis.

FCF DSCR to be tested based on last 4Q interest payable, and last 3Q + 1Q forward scheduled amortisation (excluding any final bullet repayments on Class M3 Notes and Class B4 Notes).

EBITDA ICR to be tested based on last 4Q.

K. Operational Covenants

44. Disposals

No restrictions on disposals of non-core pubs.

Up to 4% of core pubs may be disposed of per annum, subject to a maximum of 20% of core pubs as at the closing date.

All core pub disposals must be deleveraging in aggregate based on trailing 24 month EBITDA of the disposed core pubs. To be tested annually. Failure of test to result in Event of Default.

List of core and non-core pubs to be fixed at closing.

Disposal thresholds to be tested by reference to EBITDA on the same basis as the current disposals test, with cumulative limits to be reset on the closing date.

45. Capex

Minimum capex required equivalent to £8,000 per core pub per annum.

Maximum capex permitted equivalent to £17,500 per core pub per annum, increasing annually in line with CPI. Additional capex over and above this limit may be funded by equity.

46. External Payments

Up to 2% of EBITDA per annum to be payable as a service fee to the Group except in circumstances where leverage on Super Senior Swap Note and Class A Notes at such time exceeds day 1 leverage on Class A Notes and Super Senior Swap Note.

47. Board Composition

Appointment of observers nominated by the Class A Noteholders, Class M Noteholders and Class B4 Noteholders at appropriate levels in the Punch corporate structure.

(i) If net leverage through the Class M3 Notes exceeds 10.0x, the Class A Noteholders shall have a right to appoint a majority of the Board of the Punch A Borrower.

(ii) Subject to (i) above, if leverage through to Class B4 Notes exceeds 10.0x, the Class B Noteholders shall have a right to appoint a majority of the Board of the Punch A Borrower.

A. Overview

1. Summary

Class A3 Notes, Class A6 Notes and Class A7 Notes fully reinstated.

£50m of cash on balance sheet used to pay down 100% of Class A8 Notes at par, together with c.£6m of associated hedge break costs. Any additional associated hedge break costs (estimated at £3m) to be settled by inclusion within issuance of Super Senior Swap Note (see below).

Amortisation of Class A Notes reprofiled to target 1.2x FCF DSCR (including fixed amortisation on Super Senior Swap Note) and final maturity set to minimise extension in WAL.

Class B1 and B2 Notes extinguished at a discount to par for a combination of (i) 42.2% new Class B3 Notes, and (ii) 57.8% equity in Punch Taverns plc ("Plc Equity"). Class C1 Notes extinguished at a discount to par for Plc Equity.

Outstanding hedge in respect of Class A8 Notes and Class C1 Notes terminated in full.

Break costs payable in respect of terminated hedges to be settled by issuance of Super Senior Swap Note.

70% of Excess Cash to be applied on each Interest Payment Date to fund a Debt Service Reserve Account ("DSRA") for Class A Notes up to a maximum of £20m (cumulative).

Firm placing of £50m of equity in Punch Taverns plc to specified existing parties in the proportions set out in section 13 below, 3.81 pence per share to raise additional funds to be applied to partially repay junior notes in the Punch A securitisation.

B. Restructuring Terms

2. Voting Fee

10bps Voting Fee payable to any noteholder who votes on the transaction (either in favour or against).

Payment of voting fee will be conditional upon the implementation of the full transaction (i.e. restructuring of both Punch A and Punch B securitisations).

3. Conditions

Restructuring of Punch A and Punch B securitisations to be inter-conditional.

Agreement of satisfactory definitive documentation.

Implementation of the restructuring to be conditional upon obtaining all necessary shareholder approvals in connection with (i) debt for equity swap, (ii) firm placing, (iii) related party transactions and (iv) whitewash procedure under Takeover Code.

C. Sources and Uses of Cash

4. Sources

(i) Cash on balance sheet, net of fees and expenses:

(ii) Group cash resources:

Total:

£60m

£0m

£60m

5. Uses

(iii) Repayment in full of Class A8 Notes, including associated hedge break costs:

(iv) Cash retained on balance sheet:

Total:

£50m

£10m

£60m

D. Existing Capital Structure

6. Class A Notes

100% of Class A3, A6 and A7 Notes reinstated.

£44m of Class A8 Notes repaid at par.

7. Class B1 Notes

Class B1 Notes to be exchanged at 95.0% of par, comprising:

(i) 42.2% new Class B3 Notes

(ii) 57.8% Plc Equity

8. Class B2 Notes

Class B2 Notes to be exchanged at 95.0% of par, comprising:

(i) 42.2% new Class B3 Notes

(ii) 57.8% Plc Equity

9. Class C1 Notes

Class C1 Notes to be exchanged at 55.0% of par, comprising:

(i) 100.0% Plc Equity

£11.5m of existing Class C1 Notes held by the wider Punch Taverns Group to be contributed to the Punch B securitisation and cancelled for no consideration.

E. Revised Capital Structure

10. Super Senior Swap Note

Quantum of Super Senior Swap Note to be calculated at transaction close based on the costs of breaking a portion of the hedges on the existing Class A8 Notes and Class C1 Notes as described in section I below estimated to be in the region of c. £34m. Fixed amortisation to be agreed prior to close. Super Senior Swap Note to have legal final maturity in 2019.

Super Senior Swap Note to have fixed amortisation profile of 100% of total principal amount calculated on a straight-line basis to legal final maturity.

For so long as funds available under the DSRA are less than £20m, 30% of Excess Cash applied in mandatory prepayment of Super Senior Swap Note and 70% of Excess Cash applied to fund a DSRA up to a maximum of £20m (cumulative).

For so long as funds available under the DSRA are no less than £20m, 100% of Excess Cash to be applied on each Interest Payment Date in mandatory prepayment of Super Senior Swap Note (see section G below).

11. Class A Notes

Class A Notes subject to a fixed amortisation schedule targeting a 1.2x FCF DSCR. Final maturities to be agreed based on review of amortisation profiles.

Class A3 Notes final maturity in 2020.

Class A6 Notes final maturity in 2021.

Class A7 Notes final maturity in 2025.

Any optional redemptions of Class A Notes to be made at modified spens (G + 100bps).

100% of funds available under the DSRA to be available for the redemption of Class A3 Notes in 2020.

12. New Class B3 Notes

Total of £64.5m new Class B3 Notes to be issued based on the allocations above.

Class B3 Notes to be subordinated (no security other than share pledge below or covenants) to Class A Notes, and to be subordinated to all Issuer Secured Creditors.

Class B3 Notes have a share pledge granted over Punch B equity (such share pledge being structurally subordinated to the Class A pledge granted over a new holding company for the Punch B securitisation group).

Ability to enforce subject to following conditions: 180-day standstill period or Class A notes have been accelerated.

Class B3 notes to benefit from a 28 day standstill of enforcement of security by senior noteholders. During the standstill period the holders of the Class B3 notes have the option to buy Class A at par plus accrued.

Class B3 Notes final maturity in 2026.

Non-call period of 2 years from closing. Thereafter, optional redemption at par plus accrued interest.

Optional prepayment of Class B3 Notes permitted following non-call period if (i) Class A Notes have been repaid in full; or (ii) redemption is funded out of the proceeds of an equity issuance; or (iii) indebtedness issued to repay or prepay the Class B3 Notes is subordinated to the Class A Notes (and such new indebtedness is on no worse terms than existing debt from a Class A perspective) and the total cash debt service costs of the Punch B securitisation following the issuance of such indebtedness is no higher than the pre-issuance cash debt service costs, provided no cash from securitisation balance sheet can be used for such a refinancing until the Super Senior Swap Notes and the Class A Notes are repaid.

13. Equity

£147m of recoveries to holders of Class B and C Notes (based on the allocations above) converted to New Plc equity, with total number of shares to be allocated based on a fixed price of 7.62 pence per share.

Firm placing of £50m of equity in Punch Taverns plc at 3.81pence per share to be allocated between funds managed by the following institutions:

(i) Alchemy Partners LLP

(ii) Avenue Europe Management LLP

(iii) Angelo Gordon Europe LLP

(iv) Glenview Capital Management LLC

(v) Luxor Capital Group LP

(vi) Oaktree Capital Management (UK) LLP

(vii) Warwick Capital Partners LLP

The proceeds of the firm placing will be applied to partially repay junior notes in the Punch A securitisation.

Following implementation of the transaction, Punch Taverns plc issued share capital will be divided approximately as follows

No. of shares

%

666m

15.0%

1,931m

43.5%

530m

11.9%

1,312m

29.6%

4,438m

100%

14. Monoline Financial Guarantees

Monoline financial guarantees on Class A7 Notes and Class A8 Notes to be released as a condition of the restructuring.

Coupons on Class A7 Notes to be increased by the quantum of the respective guarantee fee which would otherwise have been payable to MBIA.

15. Coupons

(i) Super Senior Swap Note

(ii) Class A3 Notes:

(iii) Class A6 Notes:

(iv) Class A7 Notes:

(v) Class B3 Notes:

Libor + 40bps, stepping up by 50bps every 12 months commencing from Q2-16 up to and including Q2-19

7.369%

5.943%

5.267% (increased to reflect release of monoline financial guarantee)

Cash pay coupon of 775bps

Cash coupon through to maturity on Class B3 Notes subject to stop notice on default.

In the event stop notice is issued on Class B3 Notes cash coupon payment, coupon will convert to 7.75% PIK with no cash coupon.

F. Security and Subordination

16. Subordination

Notes rank in the following order of priority and point of security:

(i) first, Super Senior Swap Note;

(ii) second, pari passu, Class A3 Notes, Class A6 Notes and Class A7 Notes;

(iii) third, Class B3 Notes (unsecured).

17. Super Senior Swap Note and Class A Notes

Full security and covenant package on existing terms.

Super Senior Swap Note will not benefit from additional covenants, security or protections beyond those afforded to the Swap Provider under the existing documentation.

18. Class B3 Notes

No security or covenant protection at Issuer level. Class B3 Notes to benefit from share pledge as set out in section 12 herein and from a 28 day standstill of enforcement of security by senior noteholders. During the standstill period the holders of the Class B3 Notes have the option to buy Class A at par plus accrued.

19. Debt Release

Transaction documents to be amended to provide for the ability to release all outstanding debt following enforcement of first priority share pledge over Punch Taverns (PMH) Limited shares and application of proceeds pursuant to post-enforcement waterfall.

G. Prepayments

20. Excess Cash

Excess cash within the Punch B securitisation (after paying permitted costs and expenses, retention of up to £10m cash reserve and the DSRA) to be applied in mandatory prepayment in the order provided for in the Prepayments Waterfall.

21. Prepayments Waterfall

For so long as funds available under the DSRA are less than £20m, 30% of Excess Cash to be applied on each Interest Payment Date in mandatory prepayment of Super Senior Swap Note and 70% of Excess Cash applied to fund the DSRA up to a maximum of £20m (cumulative).

For so long as funds available under the DSRA are no less than £20m, 100% of Excess Cash to be applied on each Interest Payment Date in mandatory prepayment of Super Senior Swap Note until repaid in full.

Thereafter, at Punch's election, Excess Cash to be retained for future debt service in respect of the Class A Notes, to buy-back Class A Notes in the market and surrender them for cancellation, or to make voluntary prepayments according to the following order of priority:

(a) first, to prepay Class A Notes until repaid in full; and

(b) second, to prepay Class B3 Notes.

All optional prepayments to be made at the optional redemption amounts set out in section E above.

H. Liquidity Facility

22. Commitment

Liquidity facility commitment resized on the closing date to provide for:

(i) 18 months' peak principal and interest on the Class A Notes (excluding any final maturity bullet repayments); and

(ii) 18 months' peak principal and interest on Super Senior Swap Note.

Commitments to be resized on a quarterly basis.

23. Sub-limits

Amount capable of being drawn at any time to be equal to the lower of:

24. Term

Liquidity facility to expire upon repayment in full of the Super Senior Swap and the Class A Notes.

25. Ratings Triggers

Minimum liquidity facility provider rating of BBB.

Current standby drawings to be returned to liquidity facility providers who meet the revised minimum liquidity facility provider rating at closing.

26. Margin and Fees

(i) Commitment Fee: N/A

(ii) Drawn Margin: 210bps

(iii) Standby Drawn Margin: N/A

Commitment fee and margins subject to the ratings based grid based on Day 1 ratings only

27. CPs to Liquidity Facility Drawings

As a CP to any drawing under the Liquidity Facility, the Issuer must provide a director's certificate confirming that any additional drawings under the Liquidity Facility are projected to be repaid based on Issuer's forecasts.

I. Hedge Contracts

28. A8 Hedge and

C1 Hedge

Terminated in full on closing.

The break costs crystallised as a result of the cancellation will be settled by the issuance of the Super Senior Swap Note. The MtM to determine the break costs will be calculated at closing.

29. Hedge Counterparty Minimum Rating

Day 1 counterparty minimum credit rating of BBB+.

No ongoing hedge rating requirement.

J. Financial Covenants

30. FCF DSCR

Free Cash Flow : EBITDA set at 1.0x.

31. EBITDA ICR

EBITDA: Debt Service (excl. fixed amortisation and prepayments from Excess cash) set at 1.25x and subject to ratchet up to 1.70x in Q4 2022.

32. Net Senior Leverage

Net Senior leverage covenant (through the A Notes, including Super Senior Swap Note and excluding swap MtM) set to the higher of:

(i) 20% headroom to business plan EBITDA in Year 1; 17.5% headroom to business plan EBITDA in Year 2; 15% headroom to business plan EBITDA thereafter

(ii) 6.0x

33. Net Worth

Minimum net worth of £50 million.

34. Financial Covenant Testing

All financial covenants to be tested quarterly on a rolling 4Q basis.

FCF DSCR to be tested based on last 4Q interest payable, and last 3Q + 1Q forward scheduled amortisation (excluding any final bullet repayments on Class B3 Notes).

EBITDA ICR to be tested based on last 4Q.

K. Operational Covenants

35. Disposals

No restrictions on disposals of non-core pubs.

Up to 4% of core pubs may be disposed of per annum, subject to a maximum of 20% of core pubs as at the closing date.

All core pub disposals must be deleveraging in aggregate based on the trailing 24 month EBITDA of the disposed core pubs. To be tested annually. Failure of test to result in Event of Default. List of core and non-core pubs to be fixed at closing.

Disposal thresholds to be tested by reference to EBITDA on the same basis as the current disposals test, with cumulative limits to be reset on the closing date.

36. Capex

Minimum capex required equivalent to £8,000 per core pub per annum.

Maximum capex permitted equivalent to £17,500 per core pub per annum, increasing annually in line with CPI. Additional capex over and above this limit may be funded by equity.

37. External Payments

None

38. Board Composition

Appointment of observers nominated by the Class A Noteholders at appropriate levels in the Punch corporate structure.

If net leverage through the Class A Notes exceeds 10.0x, the Class A Noteholders shall have a right to appoint a majority of the Board of the Punch B Borrower.

Securitisation group

EBITDA1

- Punch A

£123m - £125m

- Punch B

£75m - £78m

- External

£(1)m - £2m

Group (52 week year)

£197m - £205m

- Additional 53rd week

£4m

FY14 Group EBITDA

£201m - £209m

Punch A

Punch B

PGE

Free cash balance2

£125m

£60m

£56m

Less: liquidity balances

£15m

£10m

£6m

Excess cash

£110m

£50m

£50m