Smaller Companies: Vintage tea firm makes history with cash call in administration

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AMID THE recent flurry of rights issues swirling through the market was a little-noticed call for pounds 2.3m. It is not a large amount, and the move came from a company capitalised at just pounds 5.9m when its shares were suspended in 1992.

But the cash call is believed to be unique because Moran Holdings is the first company to fight its way out of administration via a rights issue and without a company voluntary arrangement.

The original Moran Tea Holdings was a successful tea producer rooted firmly in the days of the Indian Raj. Its extensive plantations in Assam, and indeed its profits, survived around 130 years of blighted crops, political upheaval, hikes in agricultural income tax, poor weather and tumbling prices.

But the company, which diversified into freight, also moved into property. In 1987, the word 'tea' was dropped from its name because the property division was, by then, contributing most to its profits of pounds 804,000.

Last year, however, and even though its tea and freight activities were still trading profitably, Moran Holdings went into administration, another victim of the property market crash of the late 1980s.

In 1989, the UK property arm made losses of more than pounds 1m on an ill-fated residential scheme in London's Docklands and never made it back into the black. In August 1991, Moran's shares were suspended at 133p and Touche Ross was appointed administrators.

'We haven't seen much of the company in the last year, as I'm sure you understand,' said Peter Theobald, the non-executive chairman.

The rescue plan, announced last week, involves a refinancing and restructuring. Moran is seeking pounds 2.3m and readmission to the Unlisted Securities Market. Ian McIsaac, of Touche Ross, says there has been a great deal of interest from small shareholders about the two-for-one rights issue at 30p a share.

'There are quite a few blocks of investors who have had emotional connections with the company lasting over many years,' he said.

The issue, which will come up for shareholder approval at an EGM on 5 July, has been fully underwritten by Darnforth, an investment vehicle. Darnforth is a British Virgin Islands-based subsidiary of Volkart Brother Holdings, itself part of a Swiss commodity group big in world cotton and run by Andreas Reinhart.

It could end up with up to 59 per cent of the company's shares, depending on the resposne. All the directors intend to take up their rights. Shareholders have been warned that if the proposals are not approved, liquidation of the company is inevitable.

All that is left of Moran's property development portfolio is a joint residential office and shop development on a site in inner Manchester. Moran has potential liabilities of pounds 750,000 plus interest and costs on Piccadilly Village, the subsidiary involved.

If necessary, Darnforth will underwrite a further rights issue at 30p a share to raise up to pounds 800,000. The option expires on 31 December 1995.

Moran's unaudited accounts for the six months to December 31 1992 show a pre-tax loss of pounds 398,000. The cost of administration is shown in an extraordinary charge of pounds 243,000.

After paying existing creditors and the administrators' fees, the company will be left with around pounds 100,000 of working capital. Darnforth will also provide a loan of up to pounds 1.15m secured on Moran's assets.

Moran Holdings still employs some 5,000 people on its plantations in Moran, Sepon, Attabarrie and Lepetkatta in Assam.

Throughout the period of administration, its 74 per cent- owned subsidiary, Moran Tea (India), which is listed on the Calcutta Stock Exchange, and TGG, the wholly-owned international freight forwarding operations, were not affected.

Shareholders who have not been burnt off by the experience of seeing their company going into administration should wait until trading in the shares starts on 7 July before deciding whether to take up their rights.