LEP confident banks will agree refinancing

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The Independent Online
LEP, the debt-laden freight-forwarding and security services group, is confident of securing a second restructuring next year with the help of its banks as it unveiled a half-year pre-tax loss slightly up at pounds 8.66m.

When company doctor David James went in to turn the company around in August 1992, he was guaranteed backing from LEP's 36 banks, led by NatWest, until 31 July 1995. Mr James said that despite a half-year interest bill of pounds 16m against operating profit after exceptionals of pounds 9.95m, he was confident the banks would agree a new financing.

'We have initiated discussions aimed at ensuring the continuance of adequate resources and are confident that this can be achieved,' he said. Any alternative to restructuring such as receivership, would destroy the business, he added.

He issued a stern warning to shareholders that no dividends would be paid in the foreseeable future. The company has a market capitalisation of pounds 40m.

LEP has appointed Barings to co-ordinate the refinancing talks, which will take place next spring. Meanwhile, Mr James said trading was going very well.

Operating profit at the freight-forwarding division fell to pounds 636,000 from pounds 1.1m, due to pounds 903,000 provisions against redundancy costs.

The division has invested heavily in information technology for its 28 overseas offices, enabling the headcount to be pruned by a fifth to 8,000.

The National Guardian Corporation US security unit made operating profit of pounds 10.15m, down pounds 50,000 on last time, after a pounds 1.6m exceptional loss on withdrawal from special engineering. Mr James said National had record sales.

There were three other exceptionals: former chairman John Read dropped his claim for wrongful dismissal in April but LEP had to pay legal costs of pounds 414,000; there was pounds 2.57m for an expected loss on the sale of a German LEP subsidiary, due in a few weeks' time, and a pounds 1m provision against an expected loss on the sale of a syringe disposal system.

LEP underwent a pounds 180m debt-for-equity swap in its first restructuring in 1992, cutting its debt burden from a peak of pounds 640m. Of the pounds 339m debts remaining, pounds 170m is owed by the holding company and relates to subsidiaries that have either been sold or closed.