Debt-laden property services firm Erinaceous today said banks had thrown it a funding lifeline, but warned shareholders were likely to be left empty-handed.
Croydon-based Erinaceous has been struggling with “unsustainable” debts of more than £200m (€256m) after rapid growth, although it said plans to achieve “a solvent financial solution” were at an advanced stage.
However, the company added that it was “highly unlikely” that existing shares would retain any value, whether or not the plans succeeded.
Banks are likely to own the vast majority of the group following a debt-for-equity swap, diluting investors’ current holdings.
The company is also considering the sale of its property insurance division, a profitable business which has been less affected by woes elsewhere in the business.
Erinaceous – which means hedgehog-like – was in takeover talks with several bidders last year until potential buyers pulled out following the credit crunch.
Trading has also suffered as the integration of its acquisitions took longer than expected, while its main commercial and residential property businesses are exposed to slowing markets.
Last September the firm admitted that it had breached some of its banking covenants and its shares slid from a high of nearly 400p to less than 2p, valuing the business at just £1.7m (€2.17m).
In the first half of 2007, the group swung to a £3.9m (€4.99m) loss, compared to a £12m (€15.4m) pre-tax profit the previous year. It has yet to post full-year figures.
The group’s previous management team paid the price for the slump, stepping down last November. Chairman Nigel Turnbull resigned last month.
The group was founded in 1999 and currently has around 5,000 staff. Its work includes architectural and design services, project management, building maintenance and the collection of ground rents and service charges.
Clients of the business include developers, local councils, housing associations and companies such as Liverpool Victoria, Gillette and HSBC.