Shares in Dares hit by deal on bank debt

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The Independent Online
SHARES in the property company Dares Estates, which came close to collapse after three years of heavy losses, more than halved in value after it agreed a refinancing of its debts. The proposals will leave shareholders owning only a fraction of the company.

The shares fell from 2p to 3 4 p after banks, including Midland, Barclays and two Japanese institutions, agreed to accept preference shares in exchange for pounds 23m of Dares' pounds 105m debts. A further pounds 26m is to be raised by the sale of two office developments in Woking and Bracknell to the company's property management firm.

A pro forma balance sheet shows net debts after the restructuring of pounds 62m, compared with net assets of pounds 70m. Ervin Landau, chairman, said that a rights issue was planned for the new year to provide working capital for further property acquisitions.

The restructuring dilutes ordinary shareholders' stake in the company to 27 per cent, with the remainder going to existing preference shareholders who will convert their shares into ordinary equity as part of the scheme.

The issue of new preference shares to the banks in exchange for the debts owed could give them 40 per cent of Dares if they convert into ordinaries, diluting existing shareholders further to 16 per cent.

Mr Landau said: 'The restructuring proposals provide a financial basis from which the board intends to expand the company's activities and capital base, either by injection of assets or by way of a rights issue as opportunities arise.'

He added that the rent roll from the remaining pounds 70m portfolio of offices, shops and industrial properties would almost cover the interest payments on the remaining pounds 62m of debt. The terms of the restructuring allow for the company's banks to take no more than the rent received even if that falls short of the company's interest obligations.

The plight of Dares was typical of the downfall of many property trading companies in the late 1980s. Profits in 1988, when the market was at its most frenzied, reached pounds 12.6m from sales of pounds 79m, but the slump in activity in the following four years and falling values brought the company to the brink of extinction.

Cumulative losses between 1990 and 1992 were more than pounds 80m, and while disposals of more than pounds 80m of properties in 1991 reduced debts, they also removed the company's highest income-producing assets.

In the half-year to June, the interim pre-tax loss fell from pounds 2.9m to pounds 1.8m. There was no dividend.