The East Yorkshire-based company hopes to win approval from unsecured creditors for a Company Voluntary Arrangement (CVA) – a relatively rare way of restructuring struggling companies.

Discover needs the support of at least 75 per cent of unsecured creditors to proceed with its plan, and warns it is likely to go into administration if not.

Both the company and restructuring firm KPMG are confident the deal will go ahead.

Creditors are being urged to accept cuts in the estimated £10.3m they are owed – or face being left with far less if the company is forced into administration. Discover instead proposes paying them £2.29m over five years in annual sums of £458,000.

Plans to shrink the company's footprint to five large sites and confirm revised facilities with its banks also hinge on the proposal being voted through.

"I'm confident but of course never say never," said chief executive Trevor Parker. "When it goes through – if it goes through – it will certainly put us in an exceptionally strong position."

Sports retailer JJB recently became the first listed company to secure the backing of creditors with a CVA. However, Bradford-based shoe retailer Stylo earlier this year failed in a bid to implement a CVA, as landlords voted down the plans for fear they would set a precedent.

KPMG will work with Discover for the duration of the CVA, which would run for five years. Mark Firmin, restructuring partner at KPMG in Leeds, said: "You never know until the day but it's been very, very positive. We've only had one rejection out of all the claims to date."

The company's main trading subsidiary, Signlease, has hundreds of unsecured creditors ranging from small parts suppliers to HM Revenue & Customs. HMRC is owed £5.65m and trade creditors are owed another £2.68m. HMRC declined to comment.

Discover says creditors will recoup 22p in the pound under the CVA. However, if it goes into administration, the company estimates they will recover just 1p in the pound.

"We are still in discussions with HMRC," said Mr Firmin. "We are hopeful it's going to be a positive outcome."

Unlike JJB and Stylo's CVAs, the vote does not hinge on landlords, as much of the company's estate comprises freehold properties. Landlords are understood to make up less than 10 per cent of unsecured creditors.

"This is the best and fairest route for the creditors," said Mr Parker. "The feedback I have had from creditors has been incredibly positive and appreciative.

"Management teams are doing pre-packs (administrations) and bringing businesses back out that way.

"In our situation I believe that the CVA is the right route for creditors and it's certainly the moral route for us."

Heckmondwicke-based camping and caravanning Blue Diamond is one of the group's larger creditors. Managing director Brent Turner said he voted for the CVA.

"We supported it only because we didn't really have a choice," he said.

"A percentage of something is better than zero per cent of something."

Discover has been hit hard by the slump in consumer confidence, driving it to pre-tax losses of £9.5m in the six months to the end of February. At its peak last September it had 16 sites across Britain after a series of acquisitions.

"The whole point of this is to restructure the business to make it profitable," said Mr Firmin. "The business was not sustainable at that level. The purpose is to get protection from the creditors to shrink to five more profitable sites and make it a cash generative business."

After the restructuring, the group will have sites in Birtley, Chorley, Darlington, Delamere and York, employing about 300 staff. These five large sites accounted for 60 per cent of group turnover in the six months to the end of March.

The CVA meeting is being held today at the Hilton in Neville Street, Leeds.


Rapid rise and sudden fall

Discover Leisure was originally incorporated as WC Co in April 2003 to exploit opportunities in the leisure market.

It changed its name to Titan Move in January 2004 and acquired York Boat in November 2004.

Titan Move floated on AIM in May 2005 and then made a series of acquisitions to build a core business in caravan, motor home, leisure clothing, accessories and after-sale service. Its stated aim was to lead consolidation in the sector.

It bought the company which owned Harringtons Caravans in August 2005.

It pounced on Leisure World in September 2006 for £5.75m and bought Barrons Holdings and Mendip Caravan Centre for £20m and £2.2m respectively in July 2007.

Last March it also paid £2.66m for Brownhills Group's motor homes dealership.

However, it has since shrunk from 16 sites to the current five.