Shareholders in the troubled telecommunications group, Stentor, are warned that the company "will be unable to continue to trade", if they do not agree to a restructuring plan. The directors therefore "strongly urge shareholders to vote in favour".
The prospectus, detailing the £8.3 million rescue plan, shows that existing shareholders' control of the company, will be severely diluted. Chief executive, Mr Gerard O'Keeffe, told The Irish Times it "represents a good deal for the company, the creditors and customers". He said "over time", the shareholders "will realise their investment".
Under the plan, the company will raise up to £8.3 million. The first tranche will raise £5.3 million through the issue of 5 million preferred ordinary shares of £1 each at 100p sterling per share which will be underwritten by Co-operation Retirement Benefit Fund, one of its major shareholders. An open offer allows existing shareholders to subscribe for the new shares on the basis of 25 preferred ordinary shares for every 63 ordinary shares, at the same price. This puts a price of 14p sterling on the ordinary shares which are quoted on London's AIM.
These new share will not be quoted but shareholders who take up the offer will have the right to convert the shares into ordinary (quoted) shares on the basis of seven for one. This rises to 13 to one if Co-operative Retirement Benefit Fund has to put up the second tranche of £3 million. The prospectus warns that the holders of the preferred ordinary shares may have difficulty in selling their shares prior to conversion. However, when they are converted, Stentor will apply to have them traded on AIM.
The new shares will have the right to have seven times the dividends paid to the ordinary shareholders. This rises to 13 times if the underwriters subscribe for the maximum number of shares.
The prospectus also warns that if a large number of qualifying shareholders do not subscribe for the new shares, the restructuring will result in a change in control of the company. The underwriters have agreed to waive their fees in return for 2.3 million warrants to subscribe for ordinary shares. In addition, the underwriters will be granted warrants over 3.45 million ordinary shares if they have to subscribe for further preferred ordinary shares. And another 2.94 million warrants will be issued to the two lenders, which provided a loan of £6 million, in return for new restructuring arrangements.
These warrants will be issued at prices ranging from 8.85p to 18.57p. If all the warrants are issued, and converted, then the holders would own 92.8 per cent of the enlarged Stentor equity. Even after the cash injection, including the extra £3 million, Stentor will have a borrowing requirement during part of the trading period to March 31st, 2000 and will require additional funds or borrowing facilities before that date, the prospectus warns. However, Stentor believes that the cash deficiency will be short-term.
