Redstone Telecom, the troubled telecoms carrier under siege from rebel shareholders, narrowly avoided bankruptcy yesterday after investors backed a life-or-death £25.3m refinancing.
The funding package was passed on a show of hands at a heated four-hour meeting in the Heathrow Park Hotel but investors called for a formal ballot to make sure of the outcome. Shareholders controlling 88.5 per cent of the votes cast in the ballot backed the controversial resolution to bring in fresh cash by issuing more than 2.65 billion new shares through a placing and open offer at 1p a share. An additional £4m rights issue to placate small investors was cancelled late Thursday because of insufficient take-up.
An insolvency practitioner from Ernst & Young attended the meeting, ready to put Redstone into administration immediately if investors rejected the fund-raising. The company, which sponsors the Welsh rugby team, was technically insolvent and would have collapsed without the new funds. The loss-making company has burned through £125m of cash in 15 months.
Investors were angry about the speed at which Redstone's business nose-dived and that the cash call would greatly dilute small investors' holdings. Shares in Redstone were unchanged at 1.75p each, valuing the company at £2m, far below their 253.75p share price early last year.Reuse content