Struggling Top Ten agrees new debt deal with RBS as its market value falls

Top Ten Holdings, the UK's third largest bingo operator with 37 clubs, has signed a new three-year banking facility with the Royal Bank of Scotland (RBS), that "reflects the company's current reduced level of profitability".

The agreement with RBS includes conversion of 12.8m [pounds sterling] of its existing senior debt into a mezzanine loan bearing interest at 9% over Libor (the rate at which banks lend to each other). Interest on the mezzanine loan will be paid monthly at 2% over Libor and 7% will be rolled up. The balance of the company's loan facilities of 16m [pounds sterling] will pay interest at Libor plus 2%.

As part of its amended facilities the company has agreed to grant RBS a warrant to subscribe for 10% of its share capital at a price of 20p per ordinary share at any time prior to April 2013. Shares are currently trading at about 9.5p. At the request of RBS the company will also be putting in place a cash long-term incentive plan to incentivise the executive directors of the company to deliver the three year recovery plan.

Sir Aubrey Brocklebank, Top Ten's chairman, said: "The last 12 months has seen upheaval in the bingo industry as the impact of the smoking bans and the changes made by the Gambling Act have greatly reduced profitability. As a result of its asset backed balance sheet and its strong management team Top Ten has retained the support of its bankers and has in place new facilities that give the company a reasonable period to rebuild its profit base."

Mark Brumby, analyst at Blue Oar Securities, described the senior debt interest of 9% over Libor as "eye popping", although given the travails facing the bingo industry, Top Ten will in all likelihood be delighted to have agreed the refinancing.