Call for rethink on QMH properties

QUEENS Moat Houses' mortgage debenture holders will demand next week that the debt-laden hotel chain gets a revaluation of the 27 properties that back the debentures.

At meetings next Tuesday, they will hold the threat of seizing the hotels over the management's head. This would throw the proposed reconstruction into disarray.

Debenture holders have the right to enforce their security under the terms of the bonds if the value of the properties falls below 150 per cent of the nominal value of the debenture issues. According to a Jones Lang Wootton valuation, the properties are worth 67 per cent of the nominal value.

Gary Klesch of Klesch & Co, who has a holding and is a well-known arbitrageur, has been canvassing bondholders and suggesting that they should not accept the low valuation. He has said that he will ask questions at the meeting next week, although he was out of the country and not available for comment yesterday.

But an authoritative source said that many bondholders had made up their own minds to question the valuation. He added that they might also seek to reduce the remuneration packages promised to the new management. Another popular option involves forcing the management to sue some of the previous management.

The Association of British Insurers' investment committee has recommended that its members vote for QMH's extraordinary resolution to be presented to next week's meeting. This would delay enforcement of the security. QMH has said in a letter to bondholders that it already has more than 30 per cent of the vote pledged to it.

QMH needs 75 per cent of the vote, however, and the source said the dissenters might have enough support to force a revaluation or an admission that the valuation was a pessimistic one. 'It is hanging in the balance,' he said.

If this happened, the bonds would rise in value and any arbitrageurs who had recently bought them would make a profit.

Many bondholders have yet to make up their minds. They do not have to send in their votes until Saturday.

Scottish Amicable, which holds more than 3 per cent of the ordinary shares but a smaller percentage of the bonds, said it might well vote against the extraordinary resolution and also against accepting the annual report and accounts at Monday's annual shareholders' meeting.