Wembley rolls out the paper to buy extra time

Wembley yesterday rolled out its long-awaited refinancing plan, which will return the leisure company and owner of the national football stadium to profit. The plan will significantly reduce debts, with banks and other lendersexchanging a large part of outstanding debts for ordinary shares.

This rescue was needed because of the Wembley way of doing business in the 1980s - borrowing heavily to amass a bewildering array of leisure interests. Few of those remain on the portfolio, and investors and lenders are having to pick up a hefty bill for Sir Brian Wolfson's passion for acquisition.

To extricate itself Wembley is issuing a mountain of paper. When the complex refinancing becomes reality, the number of ordinary Wembley shares in issue will rise twentyfold from 270 million to 5.37 billion.

This will represent a significant dilution for the loyal band of small shareholders who have seen their shares plunge since 1987 when the price peaked at 146p. Suspension of the shares was lifted yesterday, and within minutes the price slumped from 6p to an all-time low of 2.25p. To all intents and purposes the ordinary shareholders have seen their shares wiped out.

Larger shareholders and the lenders should not kid themselves that this will secure Wembley's future. An arduous road lies ahead for Claes Hultman, chief executive of Eurotherm, who will displace Sir Brianas chairman.

Sir Brian remains as deputy chairman on £157,000 a year plus other benefits. Associates say he is invaluable with his deep knowledge of leisure and his extensive list of contacts.

The medium-term trading outlook for Wembley is far from clear.Leisure businesses thrive by putting bottoms on seats, and shaking all the loose change out of customers' pockets. A walk down Wembley Way on most days of the year is a lonely one.

The multi-part financial restructuring makes Wembley a profitable entity but two big uncertainties remain. Of most concern is the possibility that another national stadium will be builtin the UK. The other is that the uplift to trading at the US race tracks by the introduction of video lottery machines may be dented by further deregulation of gambling laws.

The main pointsare the raising of £62.5m through a placing and open offer; conversion of £53.7m of debts into ordinary shares; the unwinding of sale and leaseback agreements on parts of the complex, which will save £4.6m a year in rent; new banking facilities of £82.5m; and the conversion of each preference share into 30 ordinary shares.

The effect on the balance sheet will see shareholders' funds rise from £43.6m to £146.6m, and gearing fall from an astronomical 324 per cent to 49 per cent.The losses of £36mfor last year should become a thing of the past for the next couple of years.Overall the group should make a trading profit in 1995 the right side of £20m.

What happens beyond next year is nowhere as easy to predict. While the refinancing gives Wembley a realistic chance of survival, doubts remain about whether trading will generate enough cash to bring the venues up to the higher standards now demanded by customers. Another cash call in a couple of years looks verylikely.