Fidelity backs down over WPP

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THE refinancing of WPP, the heavily indebted advertising group, appears likely to proceed smoothly this week after Fidelity abandoned its attempt to secure better terms for preference shareholders, an initiative that threatened to push WPP into insolvency.

The American-owned investment management group decided to vote in favour of the refinancing when it realised on Friday that it had insufficient support among other preference shareholders to block the proposals.

With most proxy votes now in, WPP's investors have indicated 'overwhelming support for the reconstruction', according to Rupert Faure Walker of Samuel Montagu, WPP's merchant bankers. 'This reconstruction is a victory for all shareholders,' he said yesterday.

WPP's banks have offered to swap pounds 143m of debt for new convertible preference shares in the company, which owns the J Walter Thompson and Ogilvy & Mather advertising agencies.

This will reduce WPP's average level of debt from about pounds 500m to a more manageable pounds 360m, but it will also leave the banks holding nearly 50 per cent of the company's equity.

Although the refinancing will increase the equity interest of existing preference shareholders from 23 to 32 per cent, Fidelity and other investors maintained that it was not a fair deal.

Fidelity's Barry Bateman said yesterday that the banks had jeopardised WPP's future by refusing to negotiate on the terms of the refinancing.

Mr Faure Walker said the refinancing negotiations had taken six or seven months, when the plans had been discussed with large numbers of preference shareholders.