Bay Restaurants, the owner of La Tasca and Slug & Lettuce, has undergone a financial restructure that provides a new £150m debt facility until 2012.
The move will see its banks Kaupthing and Commerzbank reducing the company's debt by in excess of £100m in exchange for equity.
The re-structure is another sign that Bay's banks are unwilling to force a sale of the company assets in the current climate. The debt-for-equity swap is the second time the company has seen a restructuring in 18 months.
Two of Bay's three brands, Slug & Lettuce and ha! ha! Bar & Canteen were part of Laurel Pub Company which went through a pre-pack administration in March 2008 when the company was owned by Robert Tchenguiz's R20.
The two brands emerged from the pre-pack and were joined in Bay by La Tasca, which had been held by Tchenguiz in a separate company. In March this year, Tchenguiz's two key lieutenants, Time Smalley and Aaron Brown, resigned from the board of Bay and the second company to emerge from the Laurel pre-pack, Town and City Pubs, after a request from Kaupthing.
Kaupthing is understood to have an unpaid £643m overdraft outstanding from a Tchenguiz-linked company, Ocsatello. Kaupthing is thought to be running British Virgin Islands-based Oscatello, which has the £643m outstanding despite the forced sale of Tchenguiz's stake in companies such as Mitchells & Butlers and Sainsbury's last October.
Paul Symonds, chief executive of Bay Restaurant Company,said: "We are delighted to have secured supportive refinancing from our banks which puts the Group on a secure financial footing for the future.
"Our brands have continued to trade well in spite of widely documented challenging market conditions. This transaction will enable us to continue to invest and grow our business, incentivise and motivate our management team and staff, and firmly provides the Group with the opportunity to continue to outperform in our market."
Bay is expected to deliver earnings before interest, tax, depreciation and amortisation this year of £25m from turnove of £175m.
In the past 21 weeks, Bay's 190 outlets have seen like-for-like sales down 1.4% — La Tasca has been flat, Slug & Lettuce down 3.7% and ha ha bar & grill flat.