Chemical threat to Isosceles deal

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The Independent Online
AGREEEMENT on the pounds 1.4bn financial restructuring of Isosceles, the Gateway supermarket group, could be delayed by objections from Chemical, the giant US bank.

Last week, Isosceles' banks announced a novel refinancing under which the supermarket group would be ring-fenced, taking responsibility for only pounds 500m of the total debt.

The remaining pounds 923m would be owed to the 38 bank creditors by Isosceles, the parent company, which has no assets and no guarantees over the income of the supermarkets.

But a banker closely involved in the talks warned that the assumption that the deal was home and dry when it was announced last week was wrong because of the attitude of Chemical, which had made a number of criticisms.

It had taken a tough line in several similar debt refinancings, the banker said, and he traced the attitude back to the US parent.

Chemical's objections were rocking the boat and could undermine the rescue of Isosceles unless the bank came into line with the rest of the creditors, the banker added. Chemical said it could not comment. It is thought to have lent less than pounds 60m to Isosceles.

Isosceles said last week it hoped the deal would be completed by the end of next month, giving the supermarkets a breathing space to improve their poor trading performance.

Under the restructuring deal, Isosceles would have six classes of paper. Senior lenders would be assigned 10 per cent of the equity and a range of preference shares, deep discount bonds and senior debt. Mezzanine debt holders would be assigned 45 per cent of the equity and a mix of lower- ranking preference shares and senior debt. Existing shareholders would be diluted to 45 per cent.