Resort lenders consider debt for equity swap

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The Independent Online
LENDERS to Resort Hotels are considering a plan to swap some of their debt for equity as part of an effort to save the company from receivership.

The hotels group, which has yet to present its accounts for the financial year ended last April, has been in constant discussions with its bankers since last summer when its shares were suddenly suspended at 45p.

A debt for equity swap is considered the most likely alternative to calling in receivers, which the banks as well as the company are keen to avoid for fear of causing further damage to the valuation of the group's businesses.

Resort called in outside accountants, Ernst & Young, in the summer to investigate a 'number of financing and reporting issues'.

Ernst & Young is believed to be keen to keep the company afloat. It is the first big client of the firm's newly established national department that is solely concerned with restructuring live companies.

Ernst & Young would not comment on the situation, but another adviser to Resort said: 'This is a well-run group which has been messed up because it paid too much money for some of its hotels. We need to make serious progress by the end of January.'

The adviser envisaged that if the debt for equity swap took place, shareholders would have the value of their shares seriously diluted.

'Normally there's not a lot left for shareholders, but there's got to be something.'

Resort has total borrowings of around pounds 90m, sustained against property valuations that have fallen considerably during the recent slump in the hotel trade. Difficulties in finalising the valuations were blamed by the company's directors for the long delay in publishing its accounts when resort held its shareholders' meeting on New Year's Eve.

Before Christmas the company's deputy chairman, Tim Barker, and its financial adviser, Barclays de Zoete Wedd, resigned.

Mr Barker, who joined the company at the beginning of last year, said that he could not make any comment on the reasons for his departure, except to say that there was a difference of opinion over the future strategy for the company.