Tiphook in talks on container sale: US rivals named as possible purchasers Loss of principal business 'would amount to liquidation'

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The Independent Online
TIPHOOK, the troubled transport leasing group, is in talks that may lead to the sale of its principal business, the container rental division.

The company revealed it was in talks as it announced that its bankers had provided facilities to keep the business afloat in the short term. It confirmed that there would be no dividend this year.

It said discussions were continuing with its lenders to provide longer-term funding, adding: 'It is necessary for the group either to obtain further financing or to succeed in renegotiating its principal capital expenditure commitments.'

It acknowledged that its contracts with suppliers contained clauses that would allow them to seek damages and/or keep part of advance payments if the company defaulted. It also disclosed that the company and some directors were being sued by US shareholders in four separate class actions.

Analysts said yesterday that the sale of the container business would amount to a liquidation.

Chris Kane, an analyst with Salomon Brothers in New York, said the names most mentioned as potential buyers for the division were Transamerica, GTAX, GE Capital and Xtra - all US corporations.

Mr Kane said: 'It would amount to a liquidation in favour of the banks. The container business provides 90 per cent of the group's cash flow. Bondholders and stockholders would find the value of their holdings severely impaired.'

Tiphook's container rental operation is the bulk of its business. It has 536,000 containers while its trailer fleet, the second arm of the group, is only 24,000 strong.

A forced sale of the container division would leave Tiphook with its trailer rental division and its small railway carriage business. It would be the end of the global ambitions of Robert Montague, the charismatic but controversial chairman who founded the business in 1978.

Tiphook was a stock market star in the 1980s, after floating in 1985 with a market capitalisation of pounds 15.4m. It expanded rapidly, delighting investors with a steady stream of profit rises, and by 1991 was valued at more than pounds 600m.

Since then the company has been plagued by world recession, controversy over its management and its accounting pratices, and a volatile share price.

Mr Montague acquired a reputation for opulent living, buying a 1,300-acre estate in Oxfordshire and breeding pedigree cattle. His annual salary rose to more than pounds 800,000. But in business life, he overreached himself, committing Tiphook to a massive capital expenditure programme as world trade turned down. That left the group - always highly geared - having to service huge debts, while the cash flow from its assets declined as utilisation levels fell.

Apart from the possible sale of the container division, the company said it was at a preliminary stage of discussions of various alternatives with other parties. Analysts said that this appeared to mean that other parts of the business were also up for sale or that there was a possible takeover on the agenda.

Tiphook converted a huge chunk of its secured debt into unsecured bonds over the past year. The last bond issue in April was for dollars 150m. It is understood that Lehman Brothers, which underwrote the bond issue, was left holding about 50 per cent of the bonds. They were trading at 69 per cent of par value last night in New York.

Tiphook said its principal banks, led by National Westminster and Commerzbank of Germany, had provided facilities aggregating pounds 32.2m plus a further amount to pay accrued interest on its loans and meet working capital requirements, including finance payments. They also agreed to a standstill on payments of principal

The group added that its first- half loss would be increased by the cost of banking and advisers' fees and a carrying cost against the company's employee share ownership scheme. Further refinancing costs would push the company into a second-half loss.

Shares rose 3p to 98p in London before the company's announcement, after which its American Depository Receipts fell in New York from dollars 4.50 to dollars 3.25.

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