Turmoil in the cinema boardroom

FLAMBOYANT property investor Robert Tchenguiz has dramatically quit the board of Odeon, the embattled cinema group backed by former star investment banker Robin Saunders.

Tchenguiz is believed to have had a major fall-out with other Odeon directors, who include Saunders and Guy Dellal, son of veteran City investor 'Black Jack' Dellal.

The turmoil in Odeon's boardroom has also seen the sudden exit of respected chief executive Richard Segal. It comes as concerns grow about the state of finances at Britain's biggest cinema chain, which were revealed last week in Financial Mail.

Saunders, who heads the principal finance arm of German bank WestLB, paid £431 million for Odeon in a largely debt-funded deal just seven months ago.

But cinema admissions slumped as a result of the Iraq war, a long hot summer and an absence of blockbuster film releases.

Odeon's failure to hit vital cashflow targets has strained its balance sheet and forced the postponement of a planned refinancing.

WestLB, which has a 43.3% stake in Odeon, now faces making a provision of tens of millions pounds - the exact size depends on a hoped-for improvement in trading in the run-up to Christmas.

The German bank had to write off £450 million this year when another Saunders investment, in TV rentals group Box Clever, flopped. Most of that business is now in administration and the deal led to the departure of the WestLB chief executive.

Insiders say the departure of Tchenguiz from the Odeon board is highly significant. He has backed some of Saunders' most controversial deals, including that of pub chain Pubmaster and Whyte & Mackay whisky group Kyndal.

It is unclear what prompted Tchenguiz to quit Odeon, though some directors who bought substantial stakes in the cinema chain, including Dellal, are said to be furious that the value of their investments has fallen so dramatically in such a short period.

WestLB has stopped Saunders and her London-based team from arranging any new deals and is trying to manage an orderly exit from her existing investments.

No one at Odeon was available for comment.