Uproar over Greycoat bid: Administration threat as group's preference shareholders rebel over rescue offer from Postel

DISSIDENT shareholders in Greycoat, the debt-laden property group, are planning to block a rescue bid by Britain's largest pension fund unless the terms of the deal are substantially modified.

The terms of the Postel rescue plan have angered some preference shareholders, who claim they have sufficient strength to vote it down and force the company into administration. The deal needs the approval of 75 per cent of all classes of shareholder.

Opponents include Gruss Partners, the US arbitrage house that speaks for around 9 per cent of the preference shares; Goldman Sachs (around 8 per cent); and an investment research company, John Katz and Associates, which has contacted Greycoat with the support of a substantial body of shareholders, including a major bank, an insurance company and a pension fund.

John Katz has written to Geoffrey Wilson, the Greycoat chairman, describing the offer to preference shareholders as unfair and inadequate in relation to that being made to ordinary investors. Holders of the pounds 50m preference shares are being asked to waive their dividends and take a 60 per cent drop in nominal value without any compensation. Mr Katz is planning to convene a meeting of preference holders to formulate a plan of action.

Advisers to Greycoat are warning preference holders that the company will be put into administration if they reject the proposal. Mr Katz argues that shareholders require more information on the company to see whether there are other alternatives.

Greycoat's merchant bank adviser, NM Rothschild, is due to send a circular to shareholders in the next couple of weeks, detailing the terms and including the latest report and accounts. Michael Bell of Gruss Partners said: 'If they put the document out with the current terms, it will be a waste of time and effort.'

Sources close to the company stressed there were no plans to improve the terms. One insider said a number of approaches had been made to Postel 'and they have all been rebuffed'. He emphasised that there would be additional liabilities in the event of administration, and preference holders would probably end up with a far worse deal.

Shareholders complain that for a financially strapped company, Greycoat's board members are handsomely rewarded. Last year, one director earned pounds 367,000 and two took between pounds 240,000 and pounds 245,000.

The new report and accounts will show that total boardroom emoluments, including pension contributions, have been reduced from pounds 3.1m to pounds 1.7m, with a number of executive directors taking a 'significant' drop in pay to reflect changed circumstances. It will also show that employee numbers have been reduced from 43 to 30.

The preference shares closed in the stock market last week at 47.5p, compared with the 40p on offer from Postel, implying that the market thinks there is a good chance of improved terms. The rescue deal offers ordinary shareholders the potential for significant upside in the event of recovery in the UK commercial property market, given that Greycoat is highly leveraged but has a number of properties in prime sites.