Saunders under fire over Odeon

STAR banker Robin Saunders has come under fresh pressure this weekend with the news that another of her controversial deals has turned sour - to the alarm of her German bosses.

The 41-year-old WestLB financier is said to have 'massively overpaid' for the Odeon cinema chain, Britain's biggest, which she bought in March for £431m only to see audience figures slump.

Crucial cashflow targets have been missed because box office takings failed to reach expectations as cinema-goers were deterred by the Iraq war, the long hot summer and a lack of blockbuster films.

Sources claim that Odeon's value may have slumped to only £300m while more than £100m of equity tied up in the business could already be worthless.

A planned refinancing of the Odeon deal, which would reveal the scale of the losses, has been delayed in the hope that the industry will recover in the run-up to the crucial Christmas period.

Odeon has also been rocked by a number of boardroom changes, including the abrupt departure of highly respected chief executive Richard Segal, who quit shortly after Saunders took over.

American-born Saunders may have stitched together the Odeon deal, but she relied on other investors to finance the transaction along with West LB. The bank acquired a 43.4% stake in Odeon.

Another backer is veteran City investor 'Black Jack' Dellal. Through his son Guy, Dellal is believed to have taken a substantial equity stake in Odeon.

Flamboyant Robert Tchenguiz, an Iranian-born property tycoon, was also approached to buy a stake, though the size of his holding, if any, is unclear. Both he and Guy Dellal were given seats on Odeon's board. 'Dellal has the lion's share of the equity and is livid,' said a source.

Other equity investors in Odeon are Nigel and Trevor Green, who run independent film distributor The Entertainment Group. They were also given seats on the board. Saunders is also an Odeon director, but is not thought to have a personal stake in the business.

WestLB is trying to pull out of all Saunders-related investments and has scrapped plans for a £1.8bn fund promised to Saunders at the beginning of the year. It has barred her team of 25 bankers from doing any new deals.

City bankers are shocked at the high price paid for Odeon and question the structure of the deal put together by WestLB. They are concerned about how it is funded and have highlighted the large amount of debt involved. As well as the equity stake, WestLB provided the bulk of £275m in borrowings.

Investment bank Lehman Brothers also put in £40m of 'mezzanine finance' - a mixture of debt and equity.

Venture capitalist Cinven bought Odeon from leisure group Rank for £272m in 2000 and merged it with ABC Cinemas, a smaller chain it already owned, before selling the cinemas to WestLB.

A source familiar with the Odeon deal said: 'Saunders paid £431m and the vendor laughed all the way to the bank. The other bids ranged from only £300m to £350m.' Odeon lost £6.9m on sales of £212m last year.

A spokesman for WestLB said: 'There is no pressure to refinance. It was a really tough summer for the industry, but films such as Finding Nemo, Lord Of The Rings and Matrix mean a far better fourth-quarter is in prospect.'