Tiphook set to rise from own ashes: John Murray on the impending rebirth of a leaner, chastened trailer group

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ALREADY they are calling it 'Son of Tiphook'. After a tumultuous four months in which the transport leasing group came close to oblivion, Robert Montague, its chairman and chief executive, and his advisers believe they are close to giving birth to a newer, smaller but more successful Tiphook.

A circular giving full details of the financial reconstruction of the debt-laden group is expected to go to shareholders early next month. It will explain how Tiphook plans to trade out of its remaining debts after selling its container division to Transamerica, the US giant, for a maximum of pounds 757m. Sources close to the company said that a debt-for- equity swap, mooted in some quarters, was not likely.

The past few weeks have been spent in painstaking negotiations with the plethora of lenders to the group. A company spokesman said yesterday that agreement was in sight.

There had been fears that US bondholders would upset the deal. Some of the group's bankers - notably Hypo-bank of Germany - have also been warning that their co-operation was not assured. They are all being cajoled by a team from Morgan Grenfell.

The principal business left if the container sale goes through will be the trailer-rental division, where it all started in 1978. Analysts have been sceptical that there will be enough cash flow from that business to service the considerable debt burden left.

But they acknowledge that Tiphook negotiated a very high price for the container assets, even though it has fallen, after due diligence by Transamerica, from the pounds 830m originally agreed.

The trailer division, although smaller than the container side, will still be a substantial business - the largest trailer leasing company in Europe. The problem is that recession, particularly in Germany, has destroyed its profitability. The company has managed to keep utilisation levels at a respectable rate, but at the expense of margins.

The reconstruction details will stress that a much lower overhead structure will quickly put the trailer business into profit.

Most of Tiphook's shareholders - and all its bondholders - are now in the United States, UK institutions long having lost their appetite for the business.

Adam Moskowitz, analyst at BDS Securities in New York, said: 'People are fairly optimistic that they are going to be fully covered.' The bonds, which traded as low as 70 cents in the dollar, this week traded up to 85 cents, and in the case of one issue, 94 cents.

If Robert Montague pulls the deal off, it will be a Houdini-like escape for the colourful and often controversial entrepreneur. He built Tiphook up from the ground to a group capitalised at more than pounds 600m at its peak. It is now valued at a tenth of that. On paper his shares and share options were once worth more than pounds 30m.

Tiphook's advisers acknowledge his role in the group's downfall, but say he has been determined to salvage the situation. They speak of a considerable change of attitude on his part. Tiphook was once noted for its rather flash, Eighties culture, with expensive offices and executive perks. Humbler days are ahead. Mr Montague told one adviser recently that if he had to run what's left of the company from a Portakabin, he would do so.

When Tiphook's crisis erupted last October, Mr Montague agreed to split his two roles and search for a new chief executive. It is now understood that he intends to run Son of Tiphook as chief executive, with a non-executive chairman.

Some are sceptical. One of the group's lenders said: 'Even if the restructuring goes through, all you're left with is a small, debt- ridden, loss-making company. There aren't many directors around who would want to run a business like that. For Montague, it would be like the manager of the Savoy Grill running a caff.'

(Photograph omitted)