Ratners' troubles end: Banks are expected this week to refinance the jewellery chain, writes Rupert Bruce

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BANKERS are this week expected to open the way for a full refinancing of Ratners, the troubled jewellery chain, by agreeing terms for an extension of the group's pounds 500m of borrowings.

Sources said a deal was imminent, though one or two bankers are believed still to be holding out against allowing Ratners to draw down new money without tougher terms and conditions.

Ratners' shares rose 3p to 12p last week as the stock market became increasingly confident that the troubled jeweller's 25 bankers were close to agreement.

James McAdam, Ratners' chairman, said that the negotiations were at 'an advanced stage'. Other sources said they expected announcement of a deal, accompanied by the delayed annual report and accounts, within the week.

The main sticking point has been Ratners' pressing need to find up to pounds 58m to pay off bondholders. Investors have the right to demand repayment of the bonds at 133p each at the beginning of November.

Some bankers have objected to putting up new money to pay off the bonds on the grounds that if the company were eventually to collapse, they would lose even more. As things stand, bankers rank before bondholders in any receivership.

However, if the banks do not allow Ratners to draw down money and honour the put option on the 4 per cent convertible bond, bondholders could force a collapse.

Ratners' auditors are refusing to sign off the accounts on a going concern basis until they are satisfied the company has sufficient resources to pay back the bonds.

Some banks have suggested negotiating with bondholders, but this is proving difficult because the bonds are bearer securities, making their owners hard to trace. Bankers insist that it is unrealistic for bondholders to expect the full payback rate of 133p per bond. One banker said 100p per bond was more acceptable.

The Bank of England is said to have become involved in trying to push negotiations to a successful conclusion.

The funding standstill was imposed in January, when Ratners issued a profits warning and broke banking covenants. The accounts for the year to 2 February, due by 1 August under Stock Exchange rules, will only be released once Ratners' immediate future is secure. Only then can they be signed off without qualification. They are likely to show losses of pounds 125m after exceptional items of pounds 98m.

The huge exceptional item reflects a cost-cutting programme here and the cost of covering bad debts in the US.

Ratners is said to be closing up to 75 stores this year and changing the name of many Ratners stores.

Once October's obstacle has been overcome, the bankers will see how the stores perform over the peak Christmas trading period before considering a financial restructuring next year.

Ratners improved its tight cash-flow position last June when it sold its upmarket Watches of Switzerland chain to Asprey for pounds 23.2m cash. The chain was considered to be a bad fit with Ratners' mass-market stores.

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