Isosceles puts off flotation of Wellworth

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The Independent Online
PLANS to float FA Wellworth, the Ulster stores group, have been put on the back-burner. One financial institution has expressed interest in an outright purchase of the business, which might fetch about pounds 150m.

Isosceles, the heavily borrowed owner, needs the money to repay debt and fund capital investment. The first pounds 30m of proceeds will go towards converting more Gateway supermarkets to Somerfield and other formats.

Isosceles, advised by Warburg, had planned to float Wellworth this autumn. But it is having second thoughts because of the collapsing stock market, the flops of The Telegaph and other recent floats and the off-putting location of the business.

Isosceles yesterday confirmed that agreement in principle had been reached between its bankers and investors on a refinancing: its loan covenants are to be relaxed and it has been given more time to repay mezzanine debt.

Mezzanine debt holders are to be given warrants over 20 per cent of the enlarged ordinary equity. The preference shares are to be converted into ordinaries at a notional price that recognises their accrued but unpaid interest.

The early announcement - the restructuring has not been formally agreed by all banks - is to reassure nervous suppliers to Isosceles' core business, Gateway supermarkets. At any time Gateway has trade credit of pounds 300m- pounds 400m.

Some food manufacturers have been demanding quicker repayment and better terms. One supplier reduced the 28 days' credit it used to give Gateway to 21 days. Suppliers to Hermans, the sporting goods subsidiary in the US, are even more nervous.

Banks have agreed to relax covenants over Hermans, allowing it to lift its borrowings in order to stock up and as preparation for its eventual disposal. In the UK covenants relating to Gateway's trading profits, which have been lower than expected, have been relaxed.

Isosceles, which has already undergone one restructuring in 1990, was created in 1989 to buy Gateway with more than pounds 2bn of loans. It still owes more than pounds 1.4bn in senior and mezzanine debt. Several shareholders including 3i have written off their equity.

Isosceles said a circular seeking necessary shareholder approval would be posted soon. The ensuing extraordinary meeting would then be followed by the 1992 results and finally the annual meeting in September.

Isosceles said it expected to open 150 Somerfield stores over the next three years and to float itself on the stock market in 1995.

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