Hartstone to raise pounds 30m to repay its creditors

HARTSTONE, the troubled leather goods group, is raising pounds 30m in a rights issue to restructure its balance sheet.

It said it needed the money before the end of this month to repay lenders who had threatened to withdraw banking facilities.

The company also revealed it had lost pounds 71m in the year to 31 March and was contesting a legal action brought by its former chairman, Stephen Barker. Mr Barker was responsible for Hartstone's rapid expansion, driven by acquisition, through the 1980s.

He resigned last May and was to receive pounds 400,000 in compensation for loss of office. Hartstone has only paid pounds 60,000.

The size of Hartstone's cash call is greater than expected. Analysts had forecast pounds 25m.

About pounds 15m of the proceeds will be used to repay debts. Following the issue total borrowings will be reduced to pounds 32m, equivalent to gearing of 63 per cent.

The company made an operating profit, which was wiped out by interest charges. Costs of arranging the refinancing and reorganising continuing businesses pushed the firm into loss.

The overall loss, including pounds 50m of asset write-offs, was pounds 71m.

Shaun Dowling, the chairman who has led the reconstruction of the company with new senior management, criticised the system under which he has had to reconstruct the company's finances.

'The cost to the group of the whole refinancing process was pounds 13.6m, the equivalent of over pounds 1m a month, payable to both the lenders and to a plethora of advisers in the UK and the USA,' he said.

'The expenses only weaken the asset base and both the disruption and adverse publicity can paralyse the operations of a company for an indefinite period.'

He continued: 'Much simpler and infinitely less costly would be to allow the operating units to continue to trade and to insist on an immediate accountants' report which would recommend whatever changes in management or strategy were necessary.'

Mr Dowling said there were 23 banks in the consortium, each of which charged at pounds 360 an hour.

Added expense came because bankers could not agree between themselves. Mr Dowling said that lenders split into three camps, but the picture was complicated still further by tensions between British and American creditors.

Mr Dowling admitted that the core problem lay with Hartstone. It had borrowed too much money from too wide a spread of lenders.

The two-for-one cash call is pitched at 15p. Mr Dowling said the discount - 53 per cent to yesterday's opening price - was necessary to ensure the issue was underwritten. The shares closed down 10p at 22p. In November 1991 the price touched 300p. Hartstone promised to pay a 0.32p dividend at the end of this year.

Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
Arts and Entertainment
James May, Jeremy Clarkson and Richard Hammond in the Top Gear Patagonia Special
tv
News
Claudia Winkleman and co-host Tess Daly at the Strictly Come Dancing final
people
Arts and Entertainment
Caroline Flack became the tenth winner of Strictly Come Dancing
tvReview: 'Absolutely phenomenal' Xtra Factor presenter wins Strictly Come Dancing final
PROMOTED VIDEO
Arts and Entertainment
The Apprentice finalists Mark Wright and Bianca Miller
tvBut who should win The Apprentice?
News
news
News
Elton John and David Furnish will marry on 21 December 2014
peopleSinger posts pictures of nuptials throughout the day
Sport
SPORT
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
life
Arts and Entertainment
J Jefferson Farjeon at home in 1953
booksBooksellers say readers are turning away from modern thrillers and back to golden age of crime writing
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

Marian Keyes

The author on her pre-approved Christmas, true love's parking implications and living in the moment
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick