US firm seeks stake in distress

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The Independent Online
STEINHARDT Partners, the US fund manager that has recently built up a 30 per cent stake in the preference shares of Ransomes, the grass-cutting machinery maker, has promised to bring an innovative approach to restructuring financially distressed European companies.

A source close to Steinhardt said last week that the US company, which runs hedge funds as well as investing in troubled companies, would try to repeat its US success in the UK.

'They see tremendous opportunities in Europe,' he said, adding: 'Deals here are done with a band-aid approach.'

He cited the restructurings of the leisure group Brent Walker and the Gateway supermarket company Isosceles as examples of deals that limp from one stage to another without radical improvement in a distressed company's balance sheet.

In the US, Steinhardt has been involved - often in fierce competition with other players - in the reconstruction plans of a number of companies, including the airline America West, Integrated Resources, a bankrupt financial services group, and Allegheny International, a home appliances maker.

'In their deals they try to give the company concerned an investment-grade balance sheet. One has to make the business competitive with its peer group.'

Steinhardt has made a recapitalisation proposal to Ransomes that has been described by the company as 'totally unacceptable'. The Ransomes management has said that the terms proposed by Steinhardt are too favourable to the US hedge fund and that they damage the interests of holders of the company's ordinary shares.

Sources close to Steinhardt reject this view, however. They argue that the US company, which has large resources at its disposal, would be willing to underwrite a significant share issue that would incorporate buying out the preference shareholders at a discount. They add that all Steinhardt wishes to do at the moment is sit down with the company's management to discuss their recapitalisation plans, along with any others in the offing.

They say the interest commitment to the preference shareholders of Ransomes is debilitating to the group. They expressed surprise at last week's decision by the company to pay an overdue dividend on its preference shares costing pounds 2.3m. The shares were issued to fund a dollars 150m ( pounds 100m) US acquisition in 1989.

Ransomes denied that the decision to pay the dividend was related to Steinhardt's acquisition of its stake, though it neatly avoided non-voting shares turning into voting shares, which they would have done if the dividend had been in arrears later this year.

The price of the convertible shares closed the week at 74p, up from 65.5p the day before the decision to pay the dividend.