Shares in Sanctuary collapsed yesterday after the music group behind Sir Elton John and Beyoncé warned it needed to raise substantial funds from its bankers and shareholders to stay in business. Its shares closed down 18 per cent at 2.65p, valuing the company at £9.8m.
The debt-laden company confirmed it had appointed Evolution Securities to oversee a "significant" equity fundraising and will use the proceeds to cut its £135m borrowings. Insiders say the company hopes to raise up to £130m. Evolution is trying to drum up shareholder support for the issue, which will have to be deeply discounted and will almost wipe out existing investors including Endemol's co-founder John de Mol, the inventor of Big Brother, with 19 per cent.
Analysts doubted Sanctuary would raise anything like £130m from shareholders, and said there was pressure on its bankers to write down up to half the debts, which would mean the group could get away with a £60m to £70m issue. A spokesman for HBOS, the company's main lender, said: "We remain supportive of their plans."
Sanctuary will have to take on more debt to keep going until the fundraising takes place, which could take weeks. It is seeking shareholder backing for its borrowing plans at a meeting on 20 December, stating it may have breached its limit after taking writedowns of £130m to £170m on its assets. One analyst warned: "If no equity fundraising takes place and shareholders don't approve the new borrowing powers, Sanctuary will go bankrupt."
The company lost more than 90 per cent of its market value this year after it issued several profits warnings. Andy Taylor, the executive chairman, said: "We are working hard to reset the business for sustainable growth."Reuse content