The move breaks one of the main links between the company and SG Warburg, which has advised Isosceles since its creation as a takeover vehicle in 1989.
There was surprise in the City that Warburg was not appointed by Gateway, bearing in mind its long association with Isosceles. The bank has earned huge fees from Isosceles since it advised on the purchase of Gateway four years ago. As a result of the takeover, Isosceles is burdened with debts of pounds 1bn that are not expected to be repaid in full and are trading at 50 per cent of their value on the secondary market.
A merchant banker commented that the Gateway appointment is important because 'that's where the action is, or likely to be'. The switch to Kleinwort signals the determination of David Simons, the chief executive of Isosceles and Gateway, to break with the past. He worked with the Kleinwort team, headed by Ros Hedley- Miller, while he was finance director of Storehouse.
Some bankers pointed out, however, that Warburg experienced a potential conflict of interest when Gateway became a separate company. Warburg and Hill Samuel will continue to act as advisers to Isosceles.
One source close to Gateway said that the company needed to go through a period of consolidation following its restructuring and the devolvement from Isosceles agreed last April. Under the restructuring terms, Gateway became a standalone company with no liability for the pounds 1bn of debts that remain in the Isosceles group. Advisers hope that Gateway, having notched up a reasonable profits track-record, may eventually attract new shareholders through a public flotation.