PUBS chain Punch Taverns has seen its shares drop by 29 per cent after it put forward a refinancing package which would nearly wipe out equity investors.

The plan would see creditors take a chunk of stock in the company in a "debt-for-equity swap", with some also offered cut-price shares. It would result in Punch's debt pile of more than £2 billion being cut by around a quarter, or £600 million, but see the 100 per cent owned by shareholders slashed to 15 per cent. Shares closed down 4.25p at 10.25p.

Punch, Britain's second biggest pub landlord, has around 4,000 leased and tenanted pubs.

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The latest proposal to tackle its debt mountain comes from a group of bondholders. Bondholders rejected a previous plan.

Punch said any decision would have to be "carefully considered".