Troubled London Clubs warns of split unless it can raise £50m to reduce debt

The troubled casino operator London Clubs International has warned that unless it could renegotiate £222m of debt it could be forced to split up the group.

The company, which last month extricated itself from any further financial ties to Aladdin, the Las Vegas resort that recently entered Chapter 11 bankruptcy protection, said it hoped to reach an agreement with its banks by March 2002.

Analysts said London Clubs needed to raise at least £50m to gain some leeway with its banks. Possible options could include selling some of its casino assets, completing some sale-and-leaseback deals or a debt-for-equity swap.

David Pope, at Brewin Dolphin, said: "They need to do enough to reduce their risk profile with their banks ... They must rearrange their debts to take advantage of lower interest rates."

London Clubs said it had not received any approaches from prospective buyers, although it admitted that several parties had "registered their interest to varying extents". These are thought to include Gala Group, the privately owned gaming company, William Hill, the bookmaker, and Sun International, the South African hotel and gaming group.

London Clubs yesterday unveiled a first-half pre-tax loss of £114m for the six months to 30 September, compared with a £803,000 profit a year earlier. Turnover fell 7 per cent to £69.5m. The group, which runs casinos in Britain, South Africa, Egypt and Lebanon, said it took a hit of £99.8m as it wrote down its investments in Aladdin. Its shares, which have traded as high as 62.5p earlier this year, plunged 10 per cent to 20.25p.

The group said the first half had been plagued by low win percentages of 5 per cent at Les Ambassadeurs, one of its most prestigious London casinos. This compared to a more normal win percentage – the amount of money gambled that the group expects to collect as a gross profit – of 20 per cent a year earlier.

It added that bad debt levels at Les Ambassadeurs and the glamorous 50 St James had been "significantly higher" than last year. A single high roller is understood to have failed to honour a £4m loss, which will make it harder for London Clubs to recover the debt.

London Clubs said its trading losses were also impacted by heavy spending on advisors required to negotiate the company out of its Aladdin headache. However, after a drop in business following 11 September, it said it was encouraged by recent improved levels of trading in London.