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.

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
Friends is celebrating its 20th anniversary this year
tvSeries celebrates 20th anniversary
News
news
Life and Style
Jack Cooksey goes for the grand unveiling - moments before dropping his new iPhone 6 on the floor
iphone launch
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

Sport
Yaya Touré (left) and Bayern Munich’s Spanish defender Juan Bernat
football
Arts and Entertainment
A spell in the sun: Emma Stone and Colin Firth star in ‘Magic in the Moonlight’
filmReview: Magic In The Moonlight
Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

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

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Audit Manager Central Functions

To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week