Ronson share deal in Heron debt package: Bondholders' dismay at incentives for pounds 1bn refinancing

Click to follow
GERALD RONSON and two of his fellow directors will be given 25 per cent of Heron International's shares if they succeed in repaying 37 per cent of the pounds 1bn debt subject to a refinancing arrangement which was presented yesterday to its 82 banks.

Under the terms of the refinancing, banks and bondholders owed pounds 1bn will get pounds 30 of senior debt, pounds 7 of junior debt and seven shares in Heron International for every pounds 100 owed.

If the deal is agreed, the bondholders - which are owed pounds 535m - and banks will initially own 95 per cent of the company. Mr Ronson, the founder and owner, will be left with 5 per cent.

The senior debt will pay interest of 7.5 per cent, starting next March, while the junior debt will pay 10 per cent, but not until 1997. Senior debt will be repaid in instalments between 1995 and 1997, junior debt thereafter.

Mr Ronson, chief executive, Alan Goldman, his deputy, and Michael Marx, finance director, will share incentives that could give them up to 25 per cent of Heron's shares after the year 2000 if the junior and senior debt is repaid. They have also been given five-year service contracts - two years longer than recommended by the Cadbury committee.

Heron owes a total of pounds 1.7bn, but pounds 500m of that - due from Heron Corporation, the trading company, and the Spanish subsidiary - will be repaid in full by September 1995. Interest on this debt has been paid as normal. The remaining debt relates to US businesses, which have been separated from the rest of the group, and will be repaid through the disposal of assets.

Heron's pounds 1.2bn property portfolio will be sold over the next four years, while the homes and service station businesses will be disposed of within two years. The proposals were greeted with dismay by bondholders. One expressed concern about the incentives offered to management and questioned the worth of the senior debt. The proposals will be voted on in June.

(Photograph omitted)