The company is making allegations of negligence and breach of contractual and fiduciary duty against John Read, chairman and chief executive when LEP made many of its ill-judged investments.
LEP's action is a counter-claim to Mr Read's claim for compensation of pounds 1.7m for loss of office.
Unless shareholders approve the refinancing plan at a meeting later this month the company will collapse. The refinancing involves LEP's banks exchanging pounds 180m of debt for shares, leaving existing shareholders owning just 15 per cent of the company.
David James, a company rescue specialist who commands the respect of the banks, has taken over as chairman at pounds 420,000 a year, out of which he will pay his own office and other expenses. Mr James remains chairman of Eagle Trust and Davies & Newman, owner of Dan Air. Between them these two companies paid Mr James pounds 600,000 last year, though his fees have since been substantially reduced.
LEP's pounds 235m loss for 1991 was struck after pounds 172m of extraordinary costs, including the write-off of its entire US property investments, previously valued at pounds 92.4m. This loss and additional write-offs of reserves wipe out net assets stated at pounds 211m at the end of 1990.
Before the refinancing the company has a net deficit of pounds 108.8m yet has to support pounds 507.8m of debt. The refinancing will restore net assets to pounds 73m. The banks have agreed to defer interest payments on pounds 145.7m of debt until July 1995.
Other major problems covered in the extraordinary charge include:
A pounds 10.9m write-off against properties.
Losses totalling pounds 18.8m on the sale of distribution companies in the UK, the Netherlands, Belgium and Germany.
Losses of pounds 14.4m on disposing of bearing and power transmission companies.
A pounds 23.1m write-off of its investment in a trade finance company and various T- shirt companies. Rather than providing trade finance as intended, LEP said Trading Alliance Corporation 'used much of its banking facilities to fund the operation of certain US clothing importers and manufacturers and of the (T- shirt) companies'.
Other large property write-offs feature in a pounds 47.3m exceptional charge and the balance sheet adjustments. The valuation of Swiss Bank House, an LEP development, has crashed by nearly 40 per cent from pounds 123m to pounds 75m. The annual interest payments on bonds secured on this property exceed the net rental income from Swiss Bank Corporation.
Another pounds 3.5m provision relates to the problems caused by LEP's investment of a large part of its pension fund in its own properties.
LEP's share price rose from 5 1/2 p to 6 3/4 p, having briefly touched 10p.Reuse content