Indigo stalks while Regus sings the blues

The ailing office space company must defend itself against predators

A secretive New York finance house is stalking serviced office group Regus, as the loss-making company urgently seeks new investment.

Indigo Capital has built a 4.2 per cent stake in the business, making it the second largest shareholder in Regus after chief executive and founder, Mark Dixon, who controls 62.9 per cent.

Little is known about Indigo Capital. It is run by Anthony Dub, a former managing director of Credit Suisse First Boston, and is said to focus on technology-based companies.

The existence of Indigo on Regus's share register may trouble Mr Dixon. He is trying to find new sources of cash so that he can keep his sprawling worldwide network of offices operational.

According to Deutsche Bank, Regus will run out of cash by June 2003. Analysts estimate the company needs to raise at least £50m to see it into 2004.

Regus was floated in October 2000 on the back of the dot-com boom which created an extraordinary demand for small and temporary office space. At its peak, the company was valued at £2.2bn. But its shares have since crashed as demand for this kind of workspace has dried up. Today, Regus is worth just £46.5m. In September, it reported a third-quarter loss of £13.1m, against a £10.6m loss for the same period last year.

Hawkpoint, the corporate finance house, is working with Regus to find new ways of raising cash. However, its options are limited. It is understood to have ruled out borrowing money, because it has few physical assets against which banks can lend. Most of Regus's offices are leasehold.

Regus, which has raised its profile with its sponsorship of the London Film Festival, is also thought to have ruled out securitisation. Therefore, it is now searching for a new investment partner. It is understood to be in early talks with various venture capitalists, which would take a significant stake in the business.

In a report on Regus, Deutsche Bank warns: "It is foreseeable that the current equity could be wiped out by a new cash injection."

It had been rumoured that talks between potential investors had foundered because Mr Dixon was not willing to give up his controlling stake in the business. However, a source close to the talks said that Mr Dixon was prepared to cede a 51 per cent stake in Regus should a suitable investor be found.