Rights issue to ward off receivers at Wickes

Wickes, the do-it-yourself retailer whose former bosses are being investigated for fraud, yesterday warned shareholders that the company faced receivership unless they backed a large refinancing package.

In a letter to shareholders, Wickes' chairman Michael von Brentano said: "Unless the resolutions are approved by shareholders, the group is likely to be unable to continue to trade."

An extraordinary general meeting on 6 January 1997 will vote on the refinancing proposals, the centrepieces of which are a deeply-discounted rights issue to raise pounds 53.2m, new banking facilities of pounds 52m and a pounds 100m capital reduction.

Under the terms of the rights issue, which is fully underwritten by SBC Warburg, investors are being offered one new share at the equivalent price of 15p for every share held. Trading in Wickes' shares was suspended at 69p in June after the discovery that past profits had been overstated by pounds 51m led to the resignation of pounds 1m-a-year chairman Henry Sweetbaum.

"The dilution is pretty horrible," said Nick Bubb, retail analyst at Mees Pierson. "It does reduce my estimate of Wickes' value from about 50p to 25p. "

But Bill Hoskins, Wickes' finance director, defended the rights issue terms. "It became clear during September that there would be a larger hole in the balance sheet, therefore it required a bigger than normal discount to get the rights issue away," he said.

Analysts believe Wickes is now open to an estimated pounds 200m takeover by the likes of building materials group RMC or rival DIY retailer B&Q, owned by Kingfisher. However, Wickes played down talk of a bid. "We've had nothing further than expressions of interest," said Bill Grimsey, Wickes' chief executive.

The accounting debacle over supplier rebates has forced Wickes to restate its accounts for 1995. These now show a loss before tax of pounds 279.3m, pounds 21.3m more than originally reported.

Wickes said it expected to make a loss before tax in 1996 of not more than pounds 56m, with a deficit of pounds 52.7m pounds reported for the nine months to September 28. No interim dividend will be paid in 1996 or 1997, though a final pay-out is possible in 1997.

As expected, Wickes has put its loss-making European businesses in France, Belgium and Holland up for sale to concentrate on its core UK outlets. It has also sold its conservatory business in the US.

Mr von Brentano said the investigation into former Wickes bosses by the Metropolitan Police and Serious Fraud Office which began last month was not expected to result in any liability for the group.

He also confirmed that Sandford Sigoloff, a US non-executive director closely linked to Mr Sweetbaum, would resign "in the foreseeable future".