City snubs arena rescue

WEMBLEY plc, the company that owns Wembley stadium and the Wembley arena, veered closer to receivership as some City institutions gave an early thumbs-down to its long-awaited refinancing proposals.

Under the terms of its latest proposals, Wembley hopes to raise £62.5m from shareholders to reduce debt to £72m. The scheme envisages the number of shares in issue being raised from the current 250 million to an astonishing 5.5 billion, diluting existing shareholders to less than 5 per cent of the company's share capital unless they subscribe for the new shares.

New shares are being issued at 2p each. That represents a rather steep price-earnings ratio of nearly 30 on the basis of the group's historic pre-tax profits of £5.5m for the year ending last December.

"I can't see how a company with such a dismal record can hope to raise money on these terms," said an institutional shareholder.

Some shareholders, such as Phillips & Drew Fund Management, are expected to back the new terms, but they may not be enough to vote them through.

Wembley is hoping to show doubled profits in the coming year, but around half of these relate to video lottery teminals in Rhode Island, which Wembley itself says "operates in an uncertain regulatory environment and against increasing competition from gaming organisations in neighbouring states".

Under the terms of the proposed rights issue and open offer, the banks will convert debt into equity at 4.6p a share.

Preference shareholders are being offered 30 ordinary shares for each preference share, valuing the prefs at 60p each.

Wembley needs 75 per cent of the preference shares to vote in favour of the scheme. This seems unlikely since Sir Ron Brierley's Guinness Peat Group, which owns 26 per cent of this class, bought at an average price believed to be slightly above the 60p a pref currently on offer.

Wembley is looking for institutional underwriting for £36m worth of shares and an extraordinary general meeting has been called for 4 May.

In its document to institutions, the Wembley board has warned of the increasing possibility of receivership. "The company continues to experience extreme financial difficulties," it says.