A rescue rights issue has been averted at London Clubs International after the debt-strapped casino group was handed a lifeline by its bankers. Its lenders, headed by Bank of Nova Scotia, have waived a September deadline for the company to slash its £160m debt pile.
London Clubs, which came close to bankruptcy after an ill-advised investment in Las Vegas went wrong, said it was seeking to refinance its debts by the end of this year ahead of a new June 2004 deadline.
The company was granted the breather on Wednesday evening in recognition of the efforts it has made to reduce its debts. Since its March year-end, it has cut its net debt from £220m to £160m by agreeing a sale-and-leaseback deal on one of its top London casinos and disposing of another.
The refinancing attempt has seen the group sever its ties with Sol Kerzner, the South African gaming tycoon who was touted as a possible bidder for the company. At the height of the group's financial crisis in late 2001, Mr Kerzner, who heads Kerzner International, scooped up $15m (£9m) of London Clubs' debts in a move that gave him access to the company's books.
It emerged yesterday that Mr Kerzner, who recently bought his first UK casino licence, has agreed to sell his bonds back to Bank of Nova Scotia, ending his relationship with the UK group.
Mr Kerzner is among a handful of gaming group heads to have dipped his toe in the UK market ahead of the gaming industry's forthcoming deregulation. Kerzner International declined to comment on its decision to sell the debt.
Without the banking covenant waiver, London Clubs would have had to reduce its debt by a further £40m by 1 September and ask shareholders to stump up an extra £20m in equity.
Analysts said the waiver boded well for London Clubs' future. "While the company is not out of the woods with its debt, there are definite signs of improvement and we take heart from the confidence that the lenders have shown," Charles Wilson, at Bridgewell, said.
London Clubs said better trading, cost reductions and the recovery of bad debts had helped it to bounce back into the black last year. It reported pre-tax profits, before exceptional items, of £8.5m for the year to 30 March, against a loss of £19.5m the previous year. Turnover rose 5 per cent to £160m.
The company, which runs seven UK casinos and others in Lebanon, Egypt and South Africa, said it planned to open up to 20 casinos across Britain in the next three to five years to take advantage of deregulation. Its shares gained 3p to 36.5p, valuing the company at £54m.