LIT restructuring offers shares: BES sponsor faces uncertain future

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LIT Holdings, the troubled financial group that has pared itself down to its Johnson Fry subsidiary, is planning a 40-1 share consolidation and inviting shareholders to buy further shares from LIT's banks.

LIT yesterday announced the details of the complex restructuring that it agreed last month. The company warned that without the restructuring LIT will face a deficit of net tangible assets: '(The) directors do not believe that this represents a viable financial base from which the business activities of Johnson Fry can appropriately be developed.'

Johnson Fry, best known as the leading sponsor of Business Expansion Schemes, still faces an uncertain future after the restructuring because the Government is ending the BES initiative at the end of this year.

LIT warned: 'Without BES revenues, Johnson Fry has no record of material profitability and (its) future performance is significantly dependent upon new developments. It is not easy to predict the level of success of the new products already launched, or of further innovations.'

The restructured group, which will be renamed Johnson Fry, will only resume dividend payments after establishing a record of sustainable profitability and restoring the strength of its balance sheet.

Conversion of preference shares will give the LIT's banks a 34 per cent stake. One-third of these will be offered to existing ordinary shareholders through an open offer of one share for every three held after consolidation. The offer price of 43p compares with an implied post-restructuring market price of 200p.

Fry's employee share ownership plan will purchase any shares not taken up in the open offer. The ESOP is already buying a further third of the banks' shares.

An Inland Revenue inquiry into inter-company loans has ended with only minor adjustments to the treatment of interest payments. Paul Gildersleeves, who will become group finance director, said the inquiry will not affect future taxation.