London Town took three short-term loans

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A pub company associated with Lord Ashcroft has become so strapped for cash that a vehicle connected with the Tory deputy chairman has had to provide the group with three short-term working capital loans over the past 13 months.

London Town, an Aim-listed group that operates 266 pubs, has been paying interest rates of between 10 and 15 per cent on three loans, totalling £6m, that it has received from Burac Invest and Trade.

Burac, based in the British Virgin Islands, holds 48.4 per cent of the issued share capital of London Town on behalf of The Horizon Charitable Trust. According to a 2006 company statement, Horizon is an independent charitable trust associated with the interests of Lord Ashcroft.

A relative newcomer to the pub trade, London Town started life as a residential property developer. The company only made the leap into the pub sector in November 2006 when it acquired 167 pubs from Jack Petchey, the octogenarian property investor, for £94.7m.

The deal, described at the time as the first step in building London Town into a big player in the tenanted pub industry, was funded through a £72.8m loan from Anglo Irish Bank, a £14m discounted bond issue and a £14.3m share placing.

But with the pub industry suffering a sharp drop in trade, the acquisition, along with three other smaller deals it did in subsequent months, is looking ill-timed.

For the six months to June 30 last year, pre-tax losses widened from £1.9m to £5.2m, according to the company’s last set of accounts.

Net debt at the end of the period stood at £102m – or 6½ times its market capitalisation. Interest paid during the six months rose from £2.9m to £3.4m.

The company, which revealed in the interim results that it was in the process of renegotiating the terms and covenants of its bank loans, has also lost two chief executives and a chairman over the past two years.

Robar, a Jersey-based investment vehicle of Roy Richardson, the property developer who has a 20 per cent stake in London Town, has also provided two short-term working capital loans to a total of £1.5m over the past six months. Both loans also carry a 15 per cent interest rate.

Billy Buchanan, who took over the combined role of chief executive and chief financial officer last September, declined to comment. Calls to Lord Ashcroft and Cenkos, London Town’s nominated adviser, were not returned.

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