Heron bondholders split over offer: Ronson will stay on board as executive director if American investors' bid for property empire is approved

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The Independent Online
BONDHOLDERS in Heron International were divided yesterday on whether to support a pounds 150m offer for Gerald Ronson's debt-laden property empire. It has been close to collapse since a year-old restructuring failed earlier this year.

The offer from a consortium of US investors appeared to confirm Mr Ronson's position in the company, which fell from being one of Britain's largest private businesses to one of its biggest corporate failures. If the deal is approved he will remain on the board as an executive director.

The terms of the offer would see bondholders and bankers receive up to 45p in the pound for their senior debt. They can take either cash or shares in the acquiring company, which although unquoted would give them an exposure to rising property prices in Britain and Europe.

Holders of junior tranches of debt stand to receive 6p in the pound while shareholders receive pounds 7.50 in cash for each share.

Basil Vasiliou, the Wall Street debt trader, said the deal was good news for Heron: 'It offers a solution to problems that had become chronic and gets the company back to work.'

He would be voting in favour of the offer on behalf of the pounds 44.4m of bonds he represents, more than a quarter of the total.

However, Gary Klesch, another bondholder and agent for holders of 10 per cent of the bonds, said the price was at the lower end of the range in which the bonds had traded over the past 12 months. They have been as high as 70p and no lower than 38p this year.

He also criticised the company for 'holding a gun to bondholders' heads' with the threat that the company would face liquidation if the deal were not approved.

Mr Klesch called again for the appointment of a receiver. He said he could point to several situations where receivership had yielded more than people expected.

The offer, put together by Swiss Bank Corporation, is being made by a US-based investment group that includes Rupert Murdoch and trusts for the benefit of Michael Milken, the former Wall Street junk bond specialist. HNV Acquisition is headed by Steven Green, chairman and chief executive of Astrum International, which owns the Samsonite luggage brand.

If the deal goes ahead HNV's investors will retain at least 51 per cent of Heron. Any elections for more than 49 per cent of its shares from bond and shareholders will therefore be scaled back.

The latest chapter in Heron's rescue follows the collapse of the Spanish property market, which undermined the assumptions behind a restructuring of the company's then pounds 1.4bn borrowings in September 1993.

Falling property values meant that the deficit on shareholders' funds at 31 March was greater than expected at pounds 172m. It was unable to repay its senior debt and in default of the terms of its borrowings.

At a bondholders' meeting in May holders of Heron IOUs refused to give the company an extra three months' grace to pay millions of pounds of interest. At that point Heron's adviser, UBS, started looking for potential bidders for the whole business.

Gerald Ronson, who was jailed in 1990 over the Guinness scandal, inherited Heron from his father Henry, a former boxer who had a modest furniture business. They moved into property after selling a building for far more than they were making from furniture.

Heron combined property and trading when it created Britain's first chain of self-service petrol stations. It later moved into car dealerships and insurance.

Figures for the year to March showed an operating loss of pounds 6.8m compared with a profit of pounds 30.2m a year earlier. After foreign exchange losses and interest the pre-tax loss was pounds 81.8m (pounds 218.7m loss).

At the year-end borrowings stood at pounds 675.3m. Repayments of pounds 140m have since been made.