Rescue proposals ready for European Leisure: Financial restructuring could leave banks with 71% of ordinary shares

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A FINANCIAL restructuring of European Leisure, the disco and snooker hall operator, could leave the banks owning up to 71 per cent of the company's ordinary shares. Failure to agree the proposals would jeopardise the company's ability to trade and could lead to receivership, the board warns.

European Leisure, owner of London's Camden Palace and Hippodrome discos, is burdened by debts as a legacy of its previous acquisition policy. The restructuring involves swapping pounds 20m of debt for equity, which reduces pro forma gearing to 101 per cent at the end of June against an actual 218 per cent. Debt would be reduced to pounds 54.2m, compared with net assets of pounds 33.9m.

Shareholders are being offered 175 million new shares at 1p to raise pounds 1.75m. The company warns, however, that dividends will not be paid in the foreseeable future and that gearing remains high, making trading vulnerable to any further adverse conditions.

Clive Bastin, chairman, said: 'We have arrived at a solution which should secure the financial position of European Leisure for the medium term. This restructuring will also allow us to continue to develop our core businesses.'

The remaining bank debt will be reorganised under four-year term facilities. The issue of convertible loan notes to the banks will provide pounds 1m a year for the next three years.

European Leisure's results for the year to the end of June showed continuing improvement in the second half. Operating profit was up 10.5 per cent to pounds 8.4m. Pre-tax profit was pounds 221,000, after a pounds 405,000 exceptional write-down of an outlet in Spain, compared with a loss of pounds 54.9m last year.

Ian Rock, chief executive, said the company had carried out a detailed strategic review and targeted medium-capacity discos as the businesses to aim for. He said there was good value to be had in the present market. 'We have not been able to acquire in the past two years, but will now be able to.'

Although reticent about current trading, Mr Rock said the south of England seemed to be pulling out of recession faster than elsewhere.

The shares closed down 3 4 p at 21 4 p. The extraordinary shareholders' meeting to approve the restructuring will be held in Dublin on 21 December.

(Photograph omitted)