Small Talk: Heavy debt level could prove fatal for green group Biofuels

Biofuels Corporation shares gained nearly 50 per cent last week on rumours of a bid for the group from the Swiss-based Biopetrol Industries. But investors should not get too excited about the gossip. A takeover of the company, although not totally impossible, is highly unlikely.

The Alternative Investment Market-listed group specialises in turning vegetable oil into diesel, which can then be used either as a pure substitute for conventional diesel or, more commonly, is blended with regular diesel. The great thing about this formula is that it is an environmentally friendly source of energy.

However, Biofuels has so far failed to make any money from it. Since floating on the junior market in 2004, it has racked up massive losses and now carries a £95m debt burden. This compares with a market capitalisation of just £16m. It is this heavy debt level that is most likely to deter anyone from buying Biofuels.

Time looks to be running out. The group desperately needs to raise some extra cash before the end of March. It is estimated that the AIM group needs an extra £10m to keep it afloat until the autumn.

Stick with Begbies

The trauma suffered by the debt management sector in recent weeks has unfairly taken its toll on Begbies Traynor, the insolvency expert. At the end of last month, profits warnings from Debt Free Direct and Accuma shook sentiment towards providers of so-called individual voluntary arrangements (IvAs), which allow individuals to write-off a substantial part of their debts without going bankrupt.

The City was most shaken by Accuma's suggestion that a small but growing number of lenders were refusing to approve IvAs. It also warned that the sector is becoming increasingly competitive. Begbies Traynor shares have suffered in the wake of the news despite the fact IvAs account for only 5 per cent of its turnover and a tiny part of its profits.

Recent research from the credit quality firm Experian showed that corporate failures are rising fast - they increased by 29 per cent in the fourth quarter of 2006. So it should come as no surprise to investors that business is booming at Begbies Traynor. Its profits in the current year are forecast to rise to £9.3m, from £4.7m previously, on sales of £46m. In three years the group expects revenues to have risen to £100m. Do not be surprised if the stock starts to gain ground in the coming months.

Three go into Four

Three former Schroders fund managers have set up their own specialist asset management business focused on UK equities. Four Capital Partners will be run and majority owned by Chris Rodgers, Tom Carroll and Ted Williams, who worked together at Schroders in the 1990s, and Derrick Dunne who headed the multi-manager firm MM Asset Management. The three fund managers have almost 70 years of combined experience investing in both smaller companies and big caps.

Four Capital plans three funds: a long-only diversified UK equity portfolio comprising 50 holdings, one made up of 25 and a hedge fund. It is in the process of launching a Dublin-based Open Ended Investment Company where the two long-only funds will be housed and a Cayman Island-based fund with an Irish Stock Exchange listing for the hedge fund.

Redknee looks at £20m float

A leading provider of software solutions to global mobile phone giants such as T-Mobile, vodafone and Orange is to trumpet its plans to list on the Alternative Investment Market this week.

Redknee has a suite of software that allows mobile operators to differentiate their offerings to clients and then effectively bill them for this. For example, the Canadian-based company can enable an operator to charge different tariffs to users of picture messaging depending on whether they are on a pay-as-you-go contract or have a subscription service.

Analysts expect this part of the software industry to enjoy strong growth in the coming years. It is estimated that $4.8bn (£2.5bn) will be spent by mobile companies on billing solution between 2006 and 2011. Since inception in 1999, Redknee's customer base has grown rapidly and today includes 30 mobile phone companies from around the world which provide services to 275 million wireless subscribers in more than 20 countries.

The group is increasingly looking towards emerging markets and already has a presence in the Middle East, Latin America and the Asia-Pacific region. Management controls the bulk of the company before the float, which is expected to raise between £15m and £20m, giving it a market value of around £55m. Redknee shares are expected to start trading later this month.