Exclusive: London fire company former bosses investigated as shares suspended

John Shannon , ex ceo, high flying and an alleged trail of AssetCo debts

Update: Judges are expected to approve tomorrow( wed july 28)) a deal allowing to dilute shares by 1000 per cent, raise fresh cash from foreign investors and pay off creditors so the company can save its Middle East operations and plan to sell off its London and Lincolnshire fire brigade contracts. Advisers, the current chairman,Tudor Davies, will also get big success fees for pulling this off.

Update:  Trade creditors- from American Express to Grant Thornton – today (Thursday) accepted a 23p in the pound settlement for over £1.5m owed -writing off over £1m debts and AssetCo subsidiaries -including London- accepted a  peanuts settlement (0.1p in £) for the £100m owed -paving the way for first step to save firm from total collapse but also pointing to sale of London and Lincolnshire fire contracts.

An investigation into the  financial dealings of  former bosses  of AssetCo, the private owner of London and Lincolnshire’s fire engines, is underway by the firm, shareholders have been told.

A statement from the company says: “”The Company has recently received details of allegations in respect of the activities of its former management team. The Company is investigating these
claims and following the completion of its investigation may initiate proceedings.”

The disclosures come as shares have been suspended after  the company sought yet another £14m from investors and massively diluted  junk status share price, last traded at a mere 1.75p. The move comes as Bob Neill, the fire minister, will be urging fire authorities across England to privatise their services and hand over their equipment , training and vehicles to  any private company that wants to make a profit from them.

Arcapita, the only bidder for the stricken company, walked after demanding auditors crawl over AssetCo’s accounts before it would talk any further about a take over. A statement was issued today saying it was not proceeding with the take over.

Worse, documents released to creditors reveal  up to £5m of unpaid bills – including unpaid debts for corporate entertaining at sports fixtures ( £31,000 )and the use of  private jets (£7000). The company blamed its former management and senior staff for leaving this trail of bills for high living, running up an unpaid card credit bill to American Express totalling £134,000.

Now one of the creditors, Bookajet, has told this website that it was left with unpaid bill of £7000 for a hired jet from John Shannon, the former chief executive, after AssetCo refused to pay it. According to a spokesman Mr Shannon appeared to have taken the jet for a personal trip and not on company business. AssetCo are not commenting about this but it looks like Mr Shannon is contesting it.

Bookajet say they have contacted debt recovery lawyers with the aim of seizing AssetCo’s assets.

A taxpayer owned Lloyds Bank fire engine

It has also been revealed by AssetCo and the London Fire Authority that all the capital’s fire engines have never been owned by either of them – they are the property of state-owned Lloyds banking group- owners of the Halifax and Bank of Scotland. The new difference is that Lloyds along with other London banks is now a creditor as well as an owner. There are massive unpaid loans  now totalling  some £30m since AssetCo was launched.

So firefighters are combating riots and blazes in vehicles courtesy of Lloyds Bank ,giving a new  meaning to the Black Horse’s advertising slogan ” for the Journey.” Lloyds are now both the owner and creditor to AssetCo London and promise not to auction them off to get their money back. London Fire Brigade issued a  statement assuring their fire engines are safe.

Two highly embarrassing documents  (see http://bit.ly/px5djv )have been sent to shareholders and creditors revealing the dire state of the company – and pleading with shareholders to accept a massive dilution in shares and creditors accepting less than a quarter of the money they are owed. Banks are being asked to reschedule debts.

Over £100m is owed by AssetCo to its subsidiaries,there are £17m in contingent liabilities to Lloyds, Barclays, Lombard and the Co-operative banks.

Grant Thornton, their auditors – the same company that missed the MetPro security company scandal in auditing Barnet Council’s accounts – are owed £267,000. EDF owed £18,000 in unpaid electricity bills, and even McGrigors, their solicitors based at the Old Bailey who are hosting creditors’ meeting for them, are owed £52,000. The Retained Firefighters Union, is also owed £12,000.

Even  the pension scheme for London staff is at risk if it is not bailed out – the company admit taxpayers will have  to pay out 90 per cent of the cost if it collapses.

Assuming the company is saved, the scandal is not yet over. Further litigation between the firm and John Shannon  over money  will come to court on December 5 as he likely to contest allegations of misusing AssetCo’s cash. Both Lincolnshire and London fire engine contracts are likely to be put up for sale. Only the interest in Abu Dhabi, where the firm works for the military, are likely to be saved.

London AssetCo will only be able eliminate £20m of its debts and be sold off with £30.6m debts. with Lloyds holding on to the fire engines. Lincolnshire has debts of £12m.

Anyone for privatisation after this debacle? Over to you. Mr Neill.

Judge aids rescue package for ” bust ” privatised London fire firm

Mr Justic Floyd-Helpful to AssetCo Pic courtesy:thisislondon.com

A High Court judge came to the potential rescue of AssetCo, the near insolvent owner of London and Lincolnshire’s fire engines, by granting the company  another month to negotiate an extraordinary deal with its  creditors to wipe out debts of over £100m.

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.

Update: Near bust AssetCo to try and stave off insolvency again

AssetCo, the troubled owner of London and Lincolnshire’s fire engines and military contracts in the Middle East, will make a desperate attempt to stave off bankruptcy at a hearing at the High Court tomorrow (thursday).

The near bust firm will be up before Mr Justice Peter Smith in Court 61 in the Chancery Division of the High Court in the Strand pressing for yet another adjournment as it fails to clinch a take over deal with Arcapita, the Bahrain based company. The court hearing begins at 10.30 am ,though AssetCo is at the bottom of the list, and the case may not be heard until later in the day.

In another desperate move the firm will produce at the court draft  documents to be presented to its many creditors in the hope they may stave off the evil day when it will have to cease trading. Details of the documents have not been published but a majority of creditors will have to agree before the company can be saved. The last time the company appeared before the court it said it could go bust owing £140m to banks,electricity companies and suppliers.

Will the judge still be sympathetic to this ill-fated example of privatisation? We will have to wait events.

AssetCo crisis: Shares in doldrums as investors lose faith

John Shannon - forced to stand down. Pic courtesy Belfast Telegraph

 Assetco, the badly bruised owner of London and Lincolnshire’s fire engines, is still in trouble despite seeing off winding up petitions from Revenue and Customs and law firm, Nabarros, for millions of pounds.

Shareholders hoping to make a quick buck on a rebound have instead seen their investments fall below 10p a share despite attempts by stockbrokers to recommend the company as a strong buy. Shares have fallen to just 8.20p – the lowest so far.

One commented today:

” I remember posting only a few weeks ago that IMO 8.5p would be a fair price for these shares, but now I’m not so sure. Although I am sure that all the lackies at AssetCo will be posting on hear(Sic) to give all sorts of reasons why this is just another temporary blip and that soon the price will rocket on up! When will this day come? Never in my opinion”

However there are other disturbing signs in the wind – offshore investors like Bermuda Bank have been buying in – and Verdes Management, a company turn round specialist, are demanding a more ruthless management team.

 Recently Rock Nominess Ltd- a company formerly owned by Lord Ashcroft- but now owned by City stockbrokers, Sir Charles Stanley, has increased  its shareholding. The company’s  chair is Sir David Howard, former Mayor of the City of London, obviously hoping for a long term gain.

 Previous updates:

March 25: John Shannon, chief executive of AssetCo, has resigned after being defeated by other directors over the massive dilution of its shares  caused by the  placing to pay off debts and a huge Revenue tax bill. He still has a subsantial shareholding.

This followed two days of high drama with Shannon derailing the company’s meeting by refusing to vote for the extra cash, approaching Arcapita a Bahrain bank to invest, and then being forced by a court injunction brought by other directors  to let the £26m bail out through a share placing go through.

Shareholders are divided about this. Discussion on two investment sites can be shows this  and the man in charge of Assetco’s industrial relations is offering advice to investors, showing how nervous they are . See http://bit.ly/g6Qiqq and http://bit.ly/f2YTY7

March 18: Desperate AssetCo has had to raise another £10m -making £26m in all- from shareholders in a rush to pay creditors demanding their money in case it goes bust. Shareholders worried- London fire brigade should be.  Earlier update:since writing this it is reported that creditors will face delays in payments because of the debt crisis hitting the firm. See http://bit.ly/hxmAUh

The extraordinary crisis surrounding AssetCo, the private company which owns and maintains London and Lincolnshire’s fire engines, has taken a dramatic new turn with the decision of its three main directors to quit their posts.

John Shannon, the company’s founder and chief executive; Tim Wighton, chairman, and Australian Scott Brown, the recently appointed chief financial officer, are all standing down as part of a desperate move to regain public confidence in the company.

 The company has been forced to raise £16m from the stock market to reschedule its debts and fight a winding up order from Revenue and Customs after failing to pay a £4m-£8m demand for tax.

The company’s stockbrokers, Arden Partners, are confident that they will raise the cash – but it seems to have come at the price of  John Shannon losing complete control of the company that he founded. Only weeks ago he and his top directors were thinking they could become multi-millionaires by selling off the firm on the back of the London fire dispute and fire minister Bob Neill’s promotion of private companies to take over  the ownership and maintennace of fire engines across England.

Cadogan PR ,who handle the company’s financial press, confirmed the directors were going. They pointed out that Tim Wightman, the chairman, would have stood down at the annual meeting but was leaving early. John Shannon, who has a huge stake in the company will keep his big shareholding, guarantee the company’s multi-million pound overdraft, and probably stay as a  director. They did not know what Mr Brown intended to do. All are likely to be replaced by outsiders.

Shareholders , hoping to make a fast buck from privatisation contracts, are now seeing a massive dilution in their holdings and are speculating on the Interactive Investor website whether they are going to have to pay out lots of cash to the outgoing directors. They have now seen an amazing 80 per cent drop in the company’s share price and have no chance of it going back to its original high because of the massive dilution of shares.

FBU general secretary Matt Wrack said today:
“This has the feel of a company in meltdown.  But this is not any old company suffering from the economic climate.  Because of the contracts it has obtained from the London and Lincolnshire fire authorities, every person in London and in Lincolnshire depends for their safety on the health of this company.  If AssetCo goes down, the banks own all our fire engines.  Even if the fire authorities manage to buy the fire engines back, there will be no one to maintain them.
“All this unnecessary danger stems from a bit of political dogma which says that there is nothing the public sector can do which the private sector cannot do better.  We had no concerns about the maintenance of the fire engines while the fire authorities did the job themselves.”

He called for fire authorities to take back the maintenance of the engines. London Fire Brigade are unlikely to do this and Brian Coleman, the Tory chair, must be very upset to see John Shannon stand down.  No more wining and dining from him in Westminster or free £350 Harvey Nicks Christmas hampers.