Danoptra, the fruit machines-to-leisure club operator formerly known as Kunick, is to be taken over by a group of financial institutions led by Credit Suisse and BlueBay Asset Management.

The consortium today announced an £85 million funding package that will be used to refinance its estimated debt burden of £80 million and provide money to further develop the business.

Cognetas, the private equity firm that took Kunick private in 2002 in a £118 million deal, will retain a "small shareholding" but will receive no money after writing off its equity investment.

The firm, then called Electra Partners Europe, invested £50 million in the original public-to-private transaction and a year later stumped up another £16 million to fund the £30 million acquisition of Rank Group's amusement machines division.

Danoptra's gaming machine arm, best known for the three bells logo of its Bell-Fruit brand, has been badly hit by the smoking ban in pubs and other leisure outlets. Smokers account for a disproportionate number of fruit machine players.

The group's Leisure Connection division, which runs more than 80 leisure centres for local authorities and national sports agencies, has been affected by mushrooming private sector competition.

Danoptra made a loss of £19.9 million in the 12 months to September 30, compared with losses of £24.3 million and £79.4 million in the previous two years. Turnover last year increased from £183 million to £195 million.

Derek Lloyd, chief executive for the past two years, said that although the refinancing would not produce a payout for equity shareholders, the company's debt providers, Royal Bank of Scotland, HBOS and HSBC, would "not be taking a haircut".

He said today's deal was the culmination of a turnaround in fortunes at the company. "We cost-engineered the business to be able to come through the difficulties it faced," he said.

Mr Lloyd, who is credited with reviving its fortunes, said that the deregulation of the UK gaming and amusement industry had created "significant commercial opportunities for the group".

A spokesman for Danoptra confirmed that an attempt last year to sell its Leisure Connection division had been cancelled.

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