The consortium of racing interests and Tote staff in talks to buy the state-owned bookmaker for £400m plans to take the business into internet poker and bingo.

Such new revenue streams are vital to finance an ambitious business plan, which would see the Tote take on almost £350m of debt, with a further hybrid instrument - a pay-in-kind (PIK) note of around £50m - constituting much of the rest of the financing.

The consortium comprises the Racecourse Association, an owners' group, Racecourse Holdings Trust - the owner of 13 tracks, including Cheltenham, Aintree and Epsom - and the Tote management and staff, led by chief executive Trevor Beaumont.

Its financing includes debt from Lloyds TSB, mezzanine funding and the PIK note, but very little ordinary equity.

Racecourses and owners are being invited to subscribe for the PIK, which is said either to pay "interest in the high-teens" or to roll up. The PIK ranks above the ordinary equity - 20pc of which is being gifted to Tote staff.

With such financial gearing, the consortium must exploit new revenue streams, with poker and bingo high on its agenda. As a state-owned business, it was not allowed to take such wagers.

The consortium's business plan, which is being examined by the Department for Culture, Media and Sport and the Treasury, envisages a doubling of profits within five years, implying annual growth of 15pc.

The Tote, which has 540 betting shops and a seven-year monopoly on pool betting, made £20.8m profits in its most recent full year before paying tax and making a £10.7m contribution to racing.

Industry figures question how the business can service such a high debt burden and maintain its contributions to racing.

Should the Government decide the consortium's plans do not stack up, it will auction the Tote to the highest bidder.