Cordiant seeks pounds 110m-pounds 130m injection of cash

RUSSELL HOTTEN

Cordiant, the former Saatchi & Saatchi advertising group, is planning a rights issue early next week to raise pounds 110m-pounds 130m from shareholders.

The money, the third cash call in four years, will be used to pay off debts of about pounds 130m and improve the financial position as the agency seeks to recover from the trauma of losing the Saatchi brothers.

Cordiant shares yesterday fell 7p to 84p, continuing their steady decline from a year's high of 148p as investors' concern about the company's financial health grew.

Charlie Scott, chairman, dismissed suggestions that the move was a desperate measure in the face of further decline, adding that Cordiant had renegotiated banking facilities in April and was not in breach of covenants. Under the agreement with its banks, which include Midland, Barclays and Chase Manhattan, a refinancing is not needed until January 1997.

Mr Scott would not discuss the size or timing of the rights issue, but said the conditions were about right.

"We have achieved management stability and won some important accounts," he said. "We are carrying expensive debt and can improve on the terms." The reduction of the debt from pounds 700m had been a big achievement, he said.

But another Cordiant source said that analysts' estimates that the company was looking for up to pounds 130m were not wide of the mark. "I think you can assume that a rights issue is close," he said.

In an official announcement to the Stock Exchange, Cordiant said that it had put proposals to its banks about raising new equity from shareholders and was in the process of obtaining approval. An analyst estimated that Cordiant, valued at pounds 185m, would need a one-for-one rights issue at 60p to raise pounds 120m, and the cash call becomes more difficult the lower the share price.

The first cash call in March 1991, under the Saatchi & Saatchi name, comprised a recapitalisation at 10p to raise pounds 60m. In June 1993 the company raised pounds 73m via a 10-for-27 rights issue at 130p a share. The company added that it did not anticipate another rights issue for at least three years, though things have changed substantially since then.

Maurice Saatchi, joint founder, was ousted after a bitter battle, and the company lost important business, including the $500m Mars account.

In January, the competition to fill the hole left by this lost business may get tougher when a restriction preventing Maurice Saatchi poaching former clients is lifted.

In the six months to 30 June, Cordiant made a pounds 29.6m pre-tax loss and warned that the loss of prestigious clients would hit its performance in the second half.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?