London Clubs up 60% on Aladdin debt deal

Shares in London Clubs International surged 60 per cent after the casino operator revealed yesterday it had escaped paying a $150m (£105m) liability to its troubled Las Vegas casino, Aladdin.

The group used yesterday's announcement to mask a profits warning after a series of high-rolling wins at its Les Ambassadeurs casino. "We've had one of those periods where the levels of drop and business have been at record highs but people have won. But I'd be more worried if we weren't seeing business," said Linda Lillis, the finance director. She added that as a resolution to the conflict in Afghanistan grew nearer, business levels should return to the top end of the London casino market. The group said trading profits for the six months to 30 September would be "significantly" below last year.

London Clubs, which owns 40 per cent of Aladdin, hammered out an agreement with its banks after months of negotiations under which it will give them warrants over 5 per cent of its issued share capital. They can only be exchanged if the casino operator's shares reach 50p. Yesterday they gained 10.5p to 28.25p.

The generous terms surprised many analysts who had warned the group could face an enforced sale of its assets, which include the prestigious Les Ambassadeurs and 50 St James casinos in London.

David Pope, at Brewin Dolphin, said: "[The terms] are very positive for investors. They give the group a solid base to work from."

Aladdin filed for bankruptcy at the end of September. The collapse in trading following the New York and Washington terrorist attacks proved to be the last straw for the struggling casino, which has been a headache for London Clubs since it opened, behind schedule, in August 2000.

The deal left the group with no financial obligation to Aladdin, said Ms Lillis, although it remained on the board of managers. London Clubs also agreed to pay the bank syndicate $15m in seven years' time.

Ms Lillis said that business in the UK looked exciting going forward, given the deregulation prospects posed by the Budd gambling review. "Clearly we need to look at our debt levels but we have got a good business in London and have had record levels of drop recently," she said. London Clubs has £205m of debt in the UK.