City: Baring all

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The Independent Online
Surely this is not yet another instance of Trafalgar House, the construction and property group, misleading its shareholders - not to mention the underwriters of its present pounds 211m rights issue? Many Trafalgar House investors believe that in recent years they have repeatedly had the wool pulled over their eyes, that the company's true financial position has in reality been far worse than it looked on paper.

All that should have changed with the decision to launch what amounts to a distress rights issue. Shareholders are entitled to think that the rights circular is a 'bare all' document, that for the first time in a long time they have been put fully in the picture. A pretty unedifying one it is too except for one thing that should have brought at least some relief. There are, the document says, 'no legal or arbitration proceedings pending or threatened against the company'. But hold on a moment. I thought there were.

It is well known that a group of former Davy shareholders are planning to sue Trafalgar for the pounds 54m they believe they are still owed. Trafalgar also knows that the Davy shareholders have been advised by leading counsel that they have a good case. If this isn't threatened litigation I don't know what is. Furthermore, Trafalgar plainly thinks it's a threat too. A note tacked on to the bottom of the underwriting agreement, available for inspection at the offices of Ashurst Morris Crisp in the City, reveals that, in the event of Trafalgar being sued by former Davy shareholders, sub-underwriters would still have to stand by their obligations. Oh dear.