Heron back on the brink after default: Banks appear ready to continue shoring up troubled company

HERON International was back near the brink of receivership last night after defaulting on payments to bondholders.

A meeting of bondholders called yesterday in London to approve a postponement of interest payments from March to June failed to achieve the necessary quorum and the company confirmed that it was technically in default.

Although some bondholders claimed the group must immediately find more money from its bankers to pay the interest, or go into receivership, Heron said the bondholders' meetings had only been adjourned and would be convened again later this month. There was no sign of any immediate attempt to push it over the brink.

Gary Klesch, chairman of Klesch & Co, a broker representing a number of bondholders, said: 'If they have not paid by midnight the company will be in default. Either it finds the cash within the group to make that payment or the company will call in the receivers because it is not able to meet the payments.'

However, the company's banks, led by Barclays, appeared ready to continue their plan to shore up Heron, even though it is having to be modified within months of formal agreement by creditors.

And there was no evidence that bondholders were about to tip the company into receivership by applying to the courts. The terms of the bonds demand that a petition for receivership has the backing of 25 per cent of the bondholders by value, a substantial hurdle to jump.

Mr Klesch represents holders of 10 per cent of one of the classes of bonds now in default. He estimated there was a 50/50 chance receivers would be called in. He added: 'We think receivership is the only way bondholders are going to recover value.'

The adjourned meeting was attended by bondholders or proxies representing 35 per cent of the total pounds 307m of bonds on which interest is due, by value, whereas the quorum is 50 per cent.

But another term of the bond trust deeds is that the quorum will be much lower when the meeting resumes later this month. Attendance by only two bondholders will suffice. Heron said a notice giving details of the next meeting will be published shortly.

It also said it was continuing discussions with the bond trustees and the head office division steering committee about changes in the pounds 1.4bn rescue scheme agreed last year. These are to be put to bondholders and other creditors before 30 June.