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WPP preference holders win improved swap terms

PREFERENCE shareholders in WPP Group yesterday claimed victory in their battle to improve the terms of a total dollars 422m refinancing plan proposed by the troubled advertising firm, writes Neil Thapar.

The holders were initially asked to convert about two of their preference shares for one ordinary. Under a new offer they will receive 1.5 ordinaries for every two preference shares. On conversion, they will own 35 per cent of WPP.

Although the new terms fall short of their demands, analysts believe they will accept.

The refinancing plan has been prompted by a cash flow crisis at WPP because of the recession and a debt burden of more than dollars 1bn.

The proposals involve a partial equity-for-debt swap under which its banks will convert dollars 272m of their loans into about 52 per cent of WPP's shares. In addition, they will provide up to dollars 150m in new short-term lending facilities.

Some of WPP's banks - believed to be a group of Japanese lenders - are not participating in the new lending. The shortfall is being made up by the others. Four of its lenders also effectively pulled out of the syndicate by selling their WPP loans on the secondary debt market. These were bought by Goldman Sachs, which is providing the new funds.

But WPP has also yet to reach agreement over an dollars 85m lending facility provided against its invoices by ABN, the Dutch bank. The facility runs out in the next few days but ABN is reluctant to renew the facility.