Accounting irregularities could push Regent Inns into default

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The Independent Online

Regent Inns, the struggling pubs chain which ousted its chief executive and finance director last week, was plunged into further uncertainty yesterday after revealing it had discovered accounting irregularities that might mean it has breached its banking covenants.

Regent Inns, the struggling pubs chain which ousted its chief executive and finance director last week, was plunged into further uncertainty yesterday after revealing it had discovered accounting irregularities that might mean it has breached its banking covenants.

The pubs group, which owns the Walkabout chain, was scheduled to announce its full-year results to the stock exchange yesterday. But its presentation to the City was cancelled and a statement from the company said its results would be postponed pending discussions with banks over its £75m of debt.

On Friday, Stephen Haupt, the chief executive, and Simon Rowe, the finance director, were ordered to leave the company immediately, leaving Peter Savage, its non-executive chairman, in charge. They were believed to have come under pressure from shareholders to resign, after failing to turn around the business as promised and overseeing a slump in the share price.

Their departure, only days before the results were due, is thought to have prompted a review of the accounts. The company said yesterday it had become "apparent" on Monday afternoon that it had not been accounting for the interest rate on its debts in "strict accordance" with the procedures set down by its lenders. "The company is discussing with its banking partners how to resolve the matter and until that is resolved, the company has decided to delay the announcement of its results," the statement said.

Investors were left mystified by the statement and feared that the banks may call in their loans, sending the company into receivership, if Regent cannot resolve the accounting issues. Analysts at Arbuthnot Securities said yesterday: "The departure of the CEO and FD at the end of last week was met with some relief - the management team had pushed an aggressive expansion programme which culminated in a number of profits warnings and saw the company rack up high debts. We have little confidence in the company. But this is a potentially difficult situation for the company - its liability could be significant."

Assurances from the company that its debt is in line with expectations and that trading in the first 10 weeks of its financial year was up 1 per cent, reversing a decline of 5.4 per cent over the previous year, did little to comfort shareholders. Shares closed nearly 15 per cent down at 31.5p. They were trading as high as 98p each a year ago, and in November last year, shareholders backed an £18m equity fundraising at 83p a share. Since then, Regent has seen dire trading on the high street, and has been forced to cut prices amid fierce competition. In July, Regent halved its dividend.

Nigel Popham, an analyst at Teather & Greenwood, said: "The company clearly has great problems and is in deep financial trouble."

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