Mr Justice Floyd, sitting at the Royal Courts of Justice in London, granted applications to adjourn moves until September 28 to wind up the firm in favour of allowing the company to open negotiations with its creditors on a deal that will recover some of their lost investments.
Mr Lloyd Tamlyn, for AssetCo, explained that if the company went bust now, the banks and other investors would be lucky to get 0.5 per cent of their money back. But if they agreed to negotiate with the company on a deal they could walk away with 23.5 per cent. In return they would have drop any further demands for cash, wiping out the £100m plus owed by the firm.
In effect investors in AssetCo look set to lose some £77m. Since the judge was aware that this case was being reported, AssetCo were careful not to ( as at other hearings) list who is owed what.
But from the previous hearing ( where the registrar was not aware he was being reported) the creditors named included state-owned Halifax Bank of Scotland which is owed £12m and energy company, EDF, which suggests AssetCo may not have paid fuel bills for premises they run in London. Others include FD Direct, the Inland Revenue. They will still be big losers.
The difference the deal would make is shown by Northern Bank who are owed £1.3m and have been very active in opposing moves by AssetCo to give preferential pay outs to its lawyers and accountants.
Adam Goodison, for Northern Bank, who had pressed for the company to be wound up, explained to the court why the firm is now ” content” for the deal to go ahead. This followed negotiations that changed the creditor status of Northern Bank, so it could benefit from the proposed pay out.
If AssetCo went bust the bank would be lucky to get £10,000 back from the £1.3m they put into the company. Under the revised deal the bank would get back nearer £300,000. The same would apply to other creditors.
The question – dealt in passing during the hearing – is where has AssetCo got the cash to even finance this deal? It appears to have come from money raised from international financiers who have given another £10m cash to the company on top of money raised earlier this year which severely diluted its share price to near junk status.
At the last court hearing the financiers were named as North Atlantic Value LLP, a part of the J O Hambro Capital Management Group, Utilico Investments Limited and Henderson, which incorporates the interests of Gartmore Investments Limited.
A hint came from Northern Bank’s lawyer after the hearing when he told me that the deal could be “good news” because it could rescue the company and remove most of its debts. He thought investors were ” taking a punt” on the firm’s future.
The majority of the investors will still have to agree before the deal can go ahead and it will need final approval of the court on September 28 – but the judge’s move means that it could get Brian Coleman, Tory chair of the London Fire Brigade, off the hook from seeing London’s fire engines owned by administrators.
Once the debt is cleared it then makes the company more attractive to a take over. Nothing more was said in court about a bidder – known to be Arcapita Bank in Bahrain – which suggests they have gone cold on the idea.
The situation is far from satisfactory and does not rule out a slow death of the company,reflected in its low 2.2p share price, valuing it at £5.52m today.
FBU general secretary Matt Wrack said: “Privatising emergency services is stupid and dangerous. The long, slow death of AssetCo is a perfect illustration of this. We still do not know what is going to happen to London and Lincolnshire’s fire engines. They are, we believe, going to be the property of AssetCo’s creditors when AssetCo finally goes under. I call on the London Fire Brigade and the government to bring the fleet and their maintenance back into public ownership.”
This blog was trying to contact Tudor Davies, head of AssetCo, for a comment.