Debt plan costs Heron 36m pounds

HERON International, the troubled property and petrol-retailing group, has paid pounds 36m to banks and other advisers as part of the proposed restructuring of its pounds 1.4bn debt.

More than a fifth of that - pounds 8m - has gone to the five-strong steering committee of banks, headed by Barclays, that is co-ordinating discussions on the restructuring proposals. Neither Barclays nor Heron would comment on the figures nor give a breakdown of the costs.

Heron has been in talks with its banks since last March. Two months ago, it proposed converting pounds 400m of its borrowings into equity - reducing the stake held by Gerald Ronson, its founder and chief executive, from 100 per cent to 5 per cent. A further pounds 375m is to be refinanced into new loans, while some of the businesses - including its petrol stations and the Suzuki motorcycle dealership - will be sold.

Barclays said yesterday that talks on these proposals were progressing well but no date for a meeting to approve the package had been set.

The proposals have to be agreed by the group's bondholders, who are owed pounds 600m but will receive only about 40 per cent of their capital, while banks will get 35 per cent. One bondholder has already taken steps to put the group into receivership.

The scale of fees has angered some lenders, who believe it would be cheaper to put the group into administration or receivership. Among the costs incurred are two accountants' reports - by Price Waterhouse for Heron, and KPMG Peat Marwick for the banks - and two valuations of the group's property portfolio in Britain, Europe and the US.

By contrast, the administration of Polly Peck has cost pounds 25.4m in legal and administration fees for the two years to last October, despite considerable legal expenses and problems taking control of assets in Cyprus.