The move is part of a three- stage recovery plan by Shaun Dowling, a former director of Guinness, who was brought in as chairman last year to save the leather goods company.
The cash call on shareholders, due in the next three weeks, is expected to be accompanied by a goodwill write-off of pounds 50m, that is likely to push the group into a huge taxable loss for the year to 31 March.
A large portion of the rights proceeds is earmarked for a pounds 15m loan repayable in September. The loan was extended last February as part of a standstill agreement with Hartstone's bankers, on condition that the group would tap shareholders for new funds by this month. However, the size of the expected cash call is greater than Hartstone had indicated at the time. Key reasons are a possible rise in interest rates and rising fees to the group's banks.
Hartstone is also planning to tell shareholders that it needs significant working capital to expand its two US leather goods businesses, Etienne Aigner and Michael Stevens.
The goodwill write-offs concern Hartstone's French hosiery businesses, Cogitex and Sotexa, which were sold to Courtaulds Textiles for pounds 45m last January to reduce the company's crippling debts.
As a result Hartstone has been forced to make an estimated pounds 50m write-off through its profit-and-loss account, though shareholders' funds are not expected to be directly affected. Group debts at the year- end are still predicted by analysts to be uncomfortably high, at about pounds 60m.
However, the group's underlying operating performance is expected to show a small improvement. With almost two- thirds of its businesses in the US, the company is planning a substantial expansion there.
But it is unclear whether it has made progress in selling its remaining hosiery businesses in the UK and US, on the block since last year.
One institutional investor in Hartstone said: 'The shareholders might be prepared to accept the need for big fund- raising but it will depend on how good the recovery story is.'Reuse content