QMH almost breached loan terms

QUEENS Moat Houses has revealed it came within a whisker of breaching a key loan covenant two months ago. The hotels group, reporting a slump in 2001 pre-tax profits from £17.5m to £3.3m, said that it reduced its net debt burden from £626m to £619m and complied with all loan covenants.

Debt of £215m owed to debenture holders is secured on 25 hotels. Under the terms of the trust deed, the value of the hotels must be at least 150% of the debt. At 31 December, the group just squeaked home with a ratio of 152%.

Finance director Ashley Krais played down the problem. 'It doesn't matter how much you do it by, as long as you do it,' he said. 'The valuation was only done annually, so the group did not need to worry for another nine months.'

But the cash squeeze has forced QMH to reduce capital investment to £20m from £33.8m last year. The group collapsed in 1993 and and was refinanced in 1995. It had made good progress until last year, when foot-and-mouth and 11 September reversed the improvement.

Like-for-like revenues fell 3.1% in the year to December. Trading in the first two months of this year was in line with expectations.