Shareholders in Mouchel, the financially troubled outsourcing firm, are to get just a penny for each of their shares after the firm agreed a debt-for-equity swap with its lenders.
Mouchel will pay a special dividend payment of 1p per share once the restructuring is complete, after which shareholders will have their shares repurchased, although "repurchased" is a bit of a misnomer in this case as Mouchel will not be paying anything for the shares. The payout stands at just 45% of the closing price of 2.2p on the day before terms of the restructuring were announced.
After all of the shares have been grabbed back, control of Mouchel will pass into the ownership of Barclays, Lloyds Banking Group and Royal Bank of Scotland as the price for writing off £87m of the company's net debt of £147m.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
The deal may be disappointing to Mouchel shareholders, although most have probably long written off their investment as a lost cause, but it does mean the group can continue trading, which is good news for more than 8,000 employees of the infrastructure and business services group.
Latest Videos FromMoneyWeek
In a statement the company said: "Over the past six months, the board has explored extensively various potential means of addressing the company's current financial position.
"The board believes that the restructuring is the best available means of preserving the group's business, including safeguarding its existing customer contracts and job security for more than 8,000 employees, and represents the only viable and deliverable option for delivering value to shareholders.
"The restructuring, achieved with the support of the company's lenders, will enable Mouchel to continue with business as usual."
Once the restructuring is complete, the lenders will own 80% of the company and management will retain just 20%.
"Though the underlying business is performing broadly in line with management expectations, performance in the current year continues to be impacted by the financial uncertainty surrounding the group and associated costs involved in the operational restructuring of the business," the firm added.
According to the Financial Times, Mouchel Chairman, David Shearer, said: "We have got a deal done and saved the company. We have got shareholders some value, and the alternative could have been that there was no value for them.
"Shareholders are likely to be supportive of that outcome, and the fact that the company can now move forward."
Mouchel's share price plunged 54.55% by 10:07. It has lost 98.30% of its value in the past year.
NR
