Ratners facing credit squeeze: Suppliers' revolt feared after insurance cover is refused to creditor of jewellery chain

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TRADE Indemnity, the credit insurance agency, has delivered a further blow to the troubled Ratners jewellery stores chain by refusing to grant cover to one of the company's large creditors.

The decision could spark a suppliers' revolt, with a growing number unwilling to continue trading with the company on anything more than minimum credit. That in turn could greatly aggravate the group's short-term cash problems.

Despite recent setbacks, however, bankers continue to be relatively relaxed about the group's financial position and have no immediate intention of taking precipitous action.

According to bankers, Ratners recorded a pre-tax loss of about pounds 30m in the first half of this year. This compares with an pounds 18.3m loss last time but is generally considered to have been a reasonable performance in view of the substantial downturn in sales. James McAdam, Ratners' new chairman, plans to announce the figures at the company's annual general meeting on Wednesday.

He is also expected to warn shareholders that trading is still poor, with sales down about 15 per cent on the comparable period last year.

Bankers will wait to see the pattern of sales in the group's Christmas trading period before deciding on the terms of any long-term refinancing for the company.

Its most immediate problem is the need to find pounds 58m to repay convertible bonds that fall due at the end of next month.

Though bankers have said they will allow the company to meet the repayment, provided it can do so within the terms of renegotiated loan covenants, there is growing speculation that Ratners will ask the bondholders to delay their demands until next year.

Bondholders have the right to call in receivers in the event of Ratners defaulting on the bond, but it is highly unlikely that they would do this - in a winding-up, they would almost certainly lose most, if not all, of their money.

Ratners has fallen victim to an extraordinary series of stock market rumours in recent weeks, nearly all of which have been wrong.

Most of them centre on the future of Gerald Ratner, former chairman of the group and now its chief executive. He is variously said to have had a breakdown, been fired, or be intending to leave to start a new life in the US.

Sources say that all three are incorrect and insist that Mr Ratner is determined to stay on at the company, at least until he has revived its fortunes.

Goldman Sachs, the US investment bank, has built up substantial positions in the company's various preference shares, in the hope of influencing the terms of any refinancing. Goldman Sachs is sitting on 27.5 per cent of the US convertible cumulative redeemable preference shares alone.

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