View from City Road: Tiphook teeters toward extinction

The sceptics dubbed it 'GPA with wheels'. They are being proved right. As Tiphook teeters on the brink of extinction with pounds 1.2bn of debts on its back, the question its various creditors and investors are asking is: who will suffer most from this latest collapse of an Eighties shooting star?

As is usually the case, shareholders are certain to be last in the queue to pick at the carcass of the crisis-ridden company. Whether the transport leasing group goes to the wall or survives in emasculated form, having disposed of large chunks of its assets, it is hard to see any significant return for equity investors.

If, as appears to be the case, the group's bankers are forcing the group into asset sales to recoup their secured debts, there will not be much left for the US bondholders or the holders of the ordinary shares in London or the ADRs in New York.

The container division's assets, which the company says it is negotiating to sell, have a book value of just over pounds 500m. That is an optimistic figure for a fire sale in today's depressed freight market.

It may be enough to pay off the principal banks. But it is difficult to see how the other half of the business - trailer rental - could generate enough cash to satisfy the bondholders, even with a pick-up in trade in the division's principal European markets.

A debt-for-equity swap on the part of the banks would also severely dilute shareholders. In the US, the company and some of its directors are already facing four separate class actions from shareholders. US bondholders are likely to sue too if they are left out in the cold.

It is a sorry tale. Only two years ago Tiphook was valued by the stock market at more than pounds 600m. Even after yesterday's price fall from 98p to 58p, it is capitalised at about a tenth of that. It is difficult to see how even that value can be justified in the light of the group's problems.