City & Business: Jardine rules at Trafalgar

WHEN the Keswicks first bought into the Trafalgar House shipping, contracting and hotels group about a year ago, I doubt that they had any idea of quite how serious things were. Within six months they were being forced to underwrite a rescue rights issue, the company's second cash call in little more than a year.

That saved the group from an imminent and serious breach of banking covenants but it was clear even then to those with an inside track that it was not nearly enough to re-establish and recapitalise the company to allow exploitation of contracting and property opportunities; the rights prospectus virtually said as much.

There needs to be - and is going to be - another and much larger rights issue of anything up to pounds 400m, possibly linked to a renegotiation of banking loans, to put the group on a sound footing for the future - of that there can be no doubt. The only remaining questions are when and whether any company, let alone one as accident-prone as Trafalgar, can get away with having three rights issues within two years. Few would have the cheek to try it, but soundings taken in the City seem to suggest it may be possible.

Trafalgar House is now almost completely the creature of Jardine Matheson, the Keswicks' international trading empire. Allan Gormley is shortly expected to step down as chief executive; his replacement by Nigel Rich, taipan of Jardines in Hong Kong, will complete its transformation. Mr Gormley is virtually the last of the ancien regime and with his going there will be a complete break with the sins of the past. Full-year figures due to be released in December will almost certainly be a kitchen sink exercise - more losses, more provisions - but they should also mark the low point of Trafalgar's fortunes. Provided Trafalgar can make a good enough case on its plans for the new money, another rights could end up being positively received. The Keswicks have been hugely successful with Jardines; if they indeed plan to use Trafalgar as their main British vehicle, which seems to be their intention - both Henry and Simon Keswick more or less live in Britain now - there will be plenty of investors who want to climb aboard.