David Lloyd’s Lenders Await Esporta Breakup Plan

LONDON (Reuters) – Lenders to UK fitness and sports club operator David Lloyd Leisure Ltd's 795.6 million pounds ($1.49 billion) buyout loan are awaiting the outcome of the possible break-up of fitness club operator Esporta before committing to the deal, a banking source said on Thursday.

The plan may see Esporta's racquet club business sold to David Lloyd as administrators try to recoup some of the 330 million pounds provided by Societe Generale to fund Simon Halabi's takeover of Esporta in early 2007.

Halabi bought the company through Buckingham Securities, acting on behalf of the Halabi Family Trust. The debt was structured as an operating company/property company (opco-propco) financing, which divided the company in two from a debt perspective.

As the credit crunch began to bite in Europe, Societe Generale found it was unable to syndicate the aggressively structured debt backing Esporta's buyout.

In August 2007 banks called on Halabi to put around 50 million pounds of his own money into the business or risk sending the company into administration, according to press reports.

By mid-August 2007 Bell Leisure, owners of Esporta Group, had appointed Grant Thornton as administrators of Bell Leisure Investments No.1 (UK) Ltd and Bell Leisure Investments No. 2 (UK) Ltd with the aim of reorganising Bell Leisure's capital structure or the sale of Esporta.

Other parts of the break-up plan may involve selling Esporta's gym business to LA Fitness and the Bannatyne Group.

If Esporta's racquets clubs business is sold to David Lloyd, then syndication of David Lloyd's 795.6 million pounds loan which is arranged by Bank of Scotland would be cancelled and renegotiated, a banking source close to the deal said.

Bank of Scotland Integrated Finance and London & Regional Properties bought David Lloyd Leisure from Whitbread for 925 million pounds in June 2007, backed by the 795.6 million pounds loan.

The loan joined the overhang of unsold leveraged loans that were trapped by the credit crunch in mid 2007, but the loan was recently launched nearly a year later at the end of July.

(Reporting by Alasdair Reilly; editing by Sue Thomas)