London Clubs International, the debt-laden casino operator, yesterday insisted it could trade its way back to the black after crashing £120m into the red at the full-year.
A further £62.6m writedown on its investment in the Aladdin casino in Las Vegas, now in Chapter 11, and poor trading from its high-rolling casinos in London have left the group with net assets of just £3m which supports £224m of debts.
London Clubs said that “following lengthy discussions” it had reached an agreement with its banks, led by the Bank of Nova Scotia, to extend its debt facilities to June 2004.
The banking syndicate, which includes Bank of Scotland and Societe Generale, has also advanced a further £15m of working capital.
In return, “the company has committed to its lenders to undertake a strategic review of the options available to the group and to significantly reduce current debt levels by September 1 2003”. It will also explore how to raise a further £20m of funding.
Barry Hardy, chief executive, said: “The debt can be supported by the company’s underlying cash-flow potential. That’s why the banks are prepared to roll over the debt. If they weren’t happy they wouldn’t have done it.
“What the banks have concluded is that the value of the group’s assets exceeds the money that is owed to them.”
He said new chairman Michael Beckett, appointed yesterday, would now review the business.
Options for raising money included a sale and leaseback of its 50 St James’s upmarket casino, where Mr Hardy believes the freehold is worth £20m, and of its 70pc stake in its Johannesburg casino.
He admitted, however, that last year’s poor trading, had not helped.
While group sales were £1m higher at £152.5m, group operating profits, which exclude the Aladdin write-off, fell from £19.2m to £200,000.
The board admitted that the “underlying business has inevitably suffered” from the amount of time management spent talking to its banks. Mr Hardy said the group had been hit by “several millions of pounds of bad debts”, won less at the tables and incurred “substantial professional fees”.
Bad debts are believed to have topped £7m, while fees to lawyers and advisers were over £2m.
Mr Hardy said he was “confident of recovering the bad debts”, while trading UFA in the first few months of this year was ahead of last year.
He admitted he had received “a number of approaches from people who have seen the company is in a weak position” but “selling assets cheaply does not achieve anything”.
He said the group would consider joint ventures with companies looking to enter Britain’s deregulating gaming industry.
The shares rose 0.25 to 14.5p, valuing the group at £21.3m.