First Leisure, Britain's second-biggest nightclub operator, was last night in the hands of receivers after it failed to secure the backing of its key creditors.
The company was once part of the leisure conglomerate built up by Lord Delfont which was subsequently broken up by Michael Grade, his nephew and the BBC's new chairman.
It has now been placed into administration and is the highest profile victim of a downturn in the nightclubs business over the past two years.
Simon Bower and John Whitfield, from RSM Robson Rhodes, have been appointed to try to salvage the company which employs 1,600 people and operates a chain of 28 nightclubs across the country. These include Equinox in Leicester Square in London and the Creation brand of clubs in Brighton, Cardiff, Leeds, Leicester and Stoke.
The nightclubs business was formed from a management buyout in 2000 led by Candover with support from 3i and PPM Ventures. The deal originally valued the company at £220m including £80m of equity and bank debt of £140m.
Candover is understood to have realised half of its stake through a sale and leaseback of some of First Leisure's property after the MBO, and is understood to have since written off its remaining investment.
First Leisure has been hit by poor trading conditions in its clubs but also the failure of two other nightclub groups, Brannigans and Springwood. These companies had taken over leases originally owned by First Leisure. Following their collapse, however, the leases reverted to First Leisure, creating an added burden on its finances.
Mr Bower said: "First Leisure is the latest casualty of the decline in the nightclub sector. The group has, however, a core business that is essentially sound, around which management have developed sensible plans for the future. Our key objectives are to preserve the business and secure the employment of the 1,600 employees. We will be working ... to ensure it's business as usual."