The London Mardi Gras, the annual gay, lesbian and bisexual festival, has staved off the threat of financial collapse.

The company which runs the festival has run up nearly half a million pounds of debts and was threatened with bankruptcy.

On Friday the organisers met their creditors and agreed to pay back 10p for every �1 owed.

The party this year on Hackney Downs failed to sell enough tickets and there is now a big question over how it will be organised in the future.

We 're not a large company, I'd like to say it's no big deal, but it will make a difference

Barry Laidler, creditor

The event originated with a political Gay Pride march in London in 1972 with around 700 people.

It has grown to 10 nationwide festivals with a combined attendance of 250,000.

Three years ago a group of businessmen set up the Mardi Gras company to run the whole London event in a more professional way.

But this year the choice of Hackney Marshes as a venue, at �17-a-ticket, was very unpopular.

Some party-goers even want the event to return to its roots and are threatening to break away and form a free party next year.

Low attendance

The festival had traditionally been held in Finsbury Park but that was unavailable.

The company had anticipated 50,000 people turning up and fewer than 30,000 did - compared to an attendance of 58,000 in 2001.

The weather was damp and wet and with live music, sports and stalls, the site became muddy.

John Miskelley, chairman of Mardi Gras 2000 Ltd told BBC London: "I believe that the location was absolutely flawed - that the decision was wrong - but we were left with very few options as to where to go."

Some want a free event in the future

The promise is that if they make money next year, the creditors will be given a bit more.

But in the last three years a profit was only made once, a little over �100,000.

Barry Laidler owns Avenue Litho Printers in central London which published flyers and posters for Mardi Gras.

He is one of many people now paying for this year's failure and will get �1,300 of his �13,000 costs.

" We're not a large company, I'd like to say it's no big deal, but it will make a difference."

The organisers say they will now go back to the gay community to find out what sort of event they want in future .