Sanctuary, the beleaguered music promoter, will announce a £100m emergency rights issue this month in a desperate bid to keep the group afloat.
The deeply indebted company, which on Friday's close had a market value of just over £12m, is expected to make the announcement in about a fortnight, probably reporting its annual results, usually delivered in January, at the same time. The issue will have to be deeply discounted and will almost wipe out shareholders' existing holdings.
Bankers said that it was unlikely that shareholders would subscribe to the issue. Unless a strategic buyer bought the shares - Sanctuary said in August it had terminated takeover talks - it is likely its banks would take control.
Sanctuary is also likely to announce a management reshuffle this month, promoting executives with financial rather than creative expertise. It could also recruit new non-executive directors with proven track records to reassure the City it can overcome its current difficulties. Sanctuary is already looking for a non-executive chairman after its executive chairman, Andy Taylor, agreed to split his roles.
Analysts also expect the company to announce a massive restatement of the income it has booked because the company is no longer expanding.
Sanctuary, the UK's largest independent record company, has a £135m loan and credit facility with HBOS which is believed to be almost used up. It also has a £30m convertible loan repayable in 2008.
Analysts blame Sanctuary's woes on over-ambitious global expansion, epitomised by the acquisition in 2003 of Music World Entertainment, the US urban music management company owned by Mathew Knowles, father of pop diva Beyonce. Sanctuary has traditionally signed rock acts such as Iron Maiden.
On Friday, Sanctuary announced an extraordinary shareholder meeting for 20 December, stating that it may have breached its borrowing limits.Reuse content