Essenden, the ten pin bowling operator, has proposed a restructuring plan to its shareholders, including a Company Voluntary Agreement (CVA) in respect of five of its 37 sites, that it believes is necessary to give the group a viable future.
The company said that without the CVA, its Tenpin business and other parts of the group are likely to be placed into administration or liquidation.
It said that a CVA would reduce the “significant cash drain on the business” from the 5 sites, assist in preventing a likely bank covenant breach in September 2011 and facilitate discussions to extend the group's revolving credit facility beyond June 2012, its current maturity date.
Essenden said that the proposed move would also allow it to carry out a fundamental restructuring of its property portfolio, which it believes must be carried out as part of its turnaround plan.
It said that its banks had agreed that the CVA will not breach the group's facilities.
The company said that over the past 18 months, radical steps had been taken to restructure the business, including a total management overhaul, renegotiation of a significant number of new contracts on better terms and the trial of new ancillary products to broaden the product offering.
It said that by the close of the financial year 2010 annualised operational savings of £4m had been achieved and a more modern product put in place in its better performing sites.
However, it had seen a like-for-like sales decline of 8.8% for the 26 weeks to 3 July 2011.
The company said that it continued to make “efforts to address this trend and turn around the business”, with a further £1.1m of potential annualised cost reductions identified.
It said that other measures, including site disposals and reduced capital expenditure had also made to alleviate the pressures on working capital.
Nick Basing, chief executive of Essenden, said: “Against a very challenging backdrop, the new team have implemented radical change. However, the current trading climate and legacy issues have combined to leave us with no choice but to exit a number of sites to ensure the viability of the group. Following this action, Essenden will be on a firmer footing.”
The company also announced that it had exchanged and completed on the sale of three freehold properties in its portfolio (current and former Rileys Snooker Clubs at Grays, Peterborough and Sheffield) that were owned by Georgica Holdings Limited. In addition unconditional contracts had been exchanged in respect of the disposal of a fourth site at Reading and this transaction is due to complete on 15 August.
Essenden said that the net cash proceeds from these four disposals were approximately £1.425m and they had a net book value of approximately £1.05m in the group’s latest accounts. The proceeds from the sale of the four sites will be utilised to pay down the group’s facilities agreement.
The unit in Sheffield has been sold to the owners of Rhino Sports based in Birely Moor, Sheffield, which intends to retain the operating Rileys business and convert a vacant former squash club for their own use. In Peterborough, the former 16,624sq ft (1,544 sq m) snooker club site has been sold to a housing association for residential development. The 12,277sq ft site in Reading has been acquired by a banqueting and conference business, which intends to convert the property to a banqueting operation, while the site in Grays, Essex, is to be acquired by a local private investor.
A deal has also been agreed on a fifth unit in Lewisham, which has an indicative scheme prepared for 56 residential units
CLIA, the leisure investment advisory subsidiary of the Coffer Group, is advising Essenden on the disposal of the five sites.
