Investors press Queens Moat to show its hand: Legal action by shareholders could delay survival plans

SHAREHOLDERS in Queens Moat Houses begin legal action today for the release of information about the company's controversial property valuations.

Denis Woodhams, chairman of the shareholders' action group, will argue at a preliminary High Court hearing that the way management is running Queens Moat is against investors' interests.

His move, under Section 459 of the Companies Act, could throw into question Queens Moat's current pounds 1.3bn refinancing talks with its 65 banks, details of which were expected to be finalised by the end of this month. If his move is upheld by the court, it could seriously delay Queens Moat's survival plans.

The refinancing is based on a valuation of QMH properties at pounds 861m - pounds 500m below a valuation made a few months earlier. These figures were included in the report and accounts approved by a majority of shareholders at the company's annual meeting last November.

But Mr Woodhams, a former Queens Moat hotel manager, said the shareholders' action group had been refused detailed information on the reasons for the lower valuation.

'I do not believe that the low valuation is the correct one,' he said. 'The company is not in as bad a shape as is being made out, and I think there is more value in Queens Moat than the management claims. I will be telling the court that the way Queens Moat is being run is prejudicial to the interest of the shareholders.'

The lower the valuation, the less chance shareholders will receive much from the refinancing. The shareholders' action group fears that most of the equity will end up with the banks.

The company says its cash-flow position is critical and there can be no delays in refinancing. Queens Moat is not paying interest on pounds 800m of debt.

Stanley Metcalfe, chairman, has warned there will have to be a further significant reduction in debt, with a large chunk of it becoming non-interest bearing. There has so far been little indication of the size of the debt-for-equity swap nor of the dilution of shareholders.