Regent delays results after discovering audit error

Debt-laden Regent Inns, which operates the Australian-themed Walkabout bar chain, said yesterday it had discovered an accounting mistake that put it in breach of its banking covenants.

The news came four days after the departure of chief executive Stephen Haupt and finance director Simon Rowe, and on the day chairman Peter Savage was expected to update investors on why the management team had gone.

Instead, Mr Savage decided to delay publication of the group's full-year results and issued a short statement to the stock exchange, saying: "The company is discussing with its banking partners how to resolve the matter."

Yesterday shares in Regent, which also operates 20 Jongleurs comedy clubs as well as 50 Walkabout bars, closed down 6.5p at 30.5p. Some analysts believe its lending banks - HSBC, Barclays and Royal Bank of Scotland - will not sanction Regent's proposed dividend payment unless this matter is resolved swiftly.

Regent insisted it would report trading and debt levels "in line with market expectations" when discussions with banks had been resolved. The suspected covenant breach is thought to relate to a complex and long-standing deal designed to secure a fixed interest rate on Regent's £70m of debt.

Mr Savage and his non-executive directors are said to have discovered on Monday afternoon that the way the group had accounted for its interest rate hedging arrangements was "not strictly in accordance" with loan agreements with its banks. In particular the group is concerned about its "historic calculation of the interest cover covenant".

The breach is believed to be regarded by Regent as a technicality, but will at the very least prove embarrassing for Mr Haupt, Mr Rowe and the firm's auditors, Ernst & Young. The company is thought to be insisting the breach is unconnected to the departure of Mr Haupt and Mr Rowe.