Bondholders of Bermuda-based Sea Containers have expressed concern over plans to float its prestigious rail and hotel chain the Orient Express.

The initial public offering of the luxury hotel chain is expected to raise $215 million which will be used to help pay off debt to Sea Containers.

Sea Containers, which is based in Hamilton, Bermuda, announced this month that it had filed a registration with the Securities Exchange Commission statement providing for the sale of shares to the public with the Securities and Exchange Commission on May 26, 2000 for Orient Express Hotels Ltd.

According to the company's quarterly report, the IPO should be launched in July on the New York Stock Exchange.

But at a shareholders meeting last week, concerns were voiced that the sale would reduce the value of Sea Containers shares and lower profits.

James Sherwood, President of Sea Containers, said that bondholders had expressed concern at about the probable spin off of Orient Express.

He told shareholders: "I can appreciate that debt holders see Sea Containers' earnings declining if Orient-Express is spun off. I would point out, however, that from your boards's viewpoint a substantial amount of new cash is coming into Sea Containers as a result of the IPO and both container and passenger transport earning should in due course make up for the loss in profits from Orient Express Hotels.'' At the annual meeting Mr. Sherwood also said that the company was considering a plan to sell a $250 million amortising bond to a UK financial institution.

This would be secured by the cash flows of the company's Irish Sea ferry business. The cash from the bond would be used to pay off public debt.

And shareholders may be given the option to sway common shares for debt. Sea Containers has been purchasing limited amounts of public debt in the open market and said last week that it was `the company's present intention' to conduct an initial public offering of its leisure section.

Before the IPO, a special general meeting of Sea Containers will be held to vote on the matter, but no date has been set.

Revenues for the last quarter for the leisure part of Sea Containers was listed as $10.6 million compared to $9.4 million for the same period the year before.

In 1999 the operating profits of the Sea Containers's subsidiary was up $15.3 million or 31 percent to $64.8 million and sales stood at $253 million.

In the same year the Sea Containers group revenue was just $1.3 billion, with pre tax profits standing at $66.6 million -- just over what the leisure division makes on its own.

The sale is expected to reduce large debt at Sea Containers and boost the share price which has fallen considerably from its 52 week high of $39.00 and has lost almost half of its worth from two years ago.

Orient Express Hotels owns 26 hotels, six luxury train services, one cruise ship and two restaurants. These include not only the Orient Express route made famous by Agatha Christie, but also the Windsor Court in New Orleans, Hotel Cipriani in Venice, 21 Club in New York, Bora Bora Lagoon Resort in French Polynesia and the Copacabana Place in Rio de Janeiro.

The growth of the Orient Express group started in 1976 with the purchase of the Cipriani, and grew again in 1982 with the addition of the Venice Simplon Orient Express. The latest acquisition was the Sydney Observatory Hotel at the beginning of 2000.

BUSINESS BUC