Lifeline out to battling LLA

James Packer's new private equity group Arctic Capital has thrown a lifeline to embattled aquarium and tourist attraction operator Living and Leisure Australia(LLA).

The listed LLA, formerly known as the MFS Living and Leisure Trust, had been fighting for survival after being caught up in the woes of its parent and had tried unsuccessfully to sell assets to repay debt.

That process was spluttering before a dramatic proposal was unveiled on Friday that would involve Hong Kong-headquartered Arctic Capital underwriting a $90 million-plus rights issue Ofshares at no more than 7.5¢ each.

LLA shares were worth 36¢ when they were suspended from trade on January 21.

Should it proceed, the play would allow the group to restructure its borrowings without having to sell assets. As part of the refinancing package, Arctic would also take over a $63 million portion Of an unsecured loan from an MFS-related fund with LLA to provide scrip and an interest-free $10 million note to cover the remaining $7 million.

Finally, Arctic would seek to become LLA's manager, effectively severing its relationship with MFS, which is now known as Octaviar.

"We see an opportunity in what is a distressed asset, and can participate in the normalising of the debt profile of the group," Arctic managing director Craig Carracher said.

"This group has entertainment assets that work well in their markets and we believe we can add further value to them."

Pitt Partners' Charbel Nader is understood to have provided the link between Living and Leisure Australia and Arctic Capital.

The deal is subject to completion of due diligence by Arctic Capital and wouid need to be agreed to by the group's major lender, National Australia Bank.

An NAB spokesman said the bank supported the refinancing proposal, under which its exposure would be fully paid out by June 13.

Living and Leisure chairman Julanne Shearer said: "The board is delighted to have been able to put into place the proposed recapitaiisation, which we consider to be in the best interests of LLA."

One observer, who deciined to be named, tipped the rights issue would be taken up by only about half the group's investors, the largest of which is Octaviar, effectively opening the door for LLA to become an Arctic-controlled vehicle.

The rights issue could be dilutive but would ensure the company's survival, which was the best shareholders could hope for, the observer said.

Before this deal loomed, Grant Samuel had been advising LLA on an asset sales process.

It is beiieved the eventual restructuring deal was hatched late in March, not long after Village Roadshow had walked away from its interest in buying assets in the trust worth $200 million.

The deal would extend Mr Packer's exposure to Austraiian ski-fields, adding LLA's ski resort businesses at Mt Hotham and Falls Creeks to the Consolidated Press Holdings investment at Perisher Blue.

The trust owns aquariums in Melbourne and on the Sunshine Coast, and in Bangkok, Shanghai and Busan.

Octaviar director Chris Scott declined to comment.