Many of the banks that make up the 70 or so lenders to Heron are furious over the size of the fees due to be paid to the five-strong steering committee, led by Barclays, and up to 30 other advisers.
Last month it was disclosed that the cost of the restructuring had reached pounds 40m, of which pounds 8m was due to go to the banks, and the rest to accountants, lawyers, surveyors, and other advisers.
A number of the banks that have lent money to Heron were angry about the costs.
'Heron is a horse with a broken leg,' said one banker. 'When we saw the cost of fixing the leg, the option of shooting the horse suddenly became much more attractive.'
The pressure appears to have worked. Barclays is now telling bankers that the restructuring costs are only pounds 28m, with just pounds 4m going to the steering committee.
A Heron adviser said: 'When they realised the opposition to these fees, some advisers were persuaded to defer their charges and many of the costs have been moved to a success fee basis.'
Heron has also vowed not to pay for 'non-essential' advisers, which means that over half the 30 firms advising Heron have been taken off the payroll.
Barclays has justified the fees by saying that there are 270 companies in the Heron group, operating in nine countries. In addition, there are 80 lending banks and 11 separate bond issues, all of which are in default.
A draft refinancing proposal went out to banks last week after being approved by the steering committee. In it the pounds 775m of debt will be converted into pounds 400m of equity, pounds 300m of senior debt maturing in 1997 and pounds 75m of junior debt repayable in 2000. In addition the banks are being asked to stump up pounds 20m of working capital.
The banks have until next week to indicate whether the proposals are acceptable. The cut in the refinancing costs may help some to vote in favour, but others may still be unhappy.
The banks are also concerned about the dramatic fall in the value of the large amount of assets in Spain owned by Heron. Since the group first revealed it was in trouble last summer, some Spanish property values have fallen by a third.
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