Rebel Redstone investors to unveil alternative rescue plan

Rebel shareholders in Redstone Telecom, the cash-strapped group that needs funds quickly to avoid bankruptcy, are today expected to detail an alternative rescue package in an attempt to derail the company's own emergency fund-raising plans.

The dissidents, under the Redstone Action Group (RAG) banner, could try to force the company into a break-up or to alter radically the terms of the planned seven-for-two placing and open offer to make it less harmful to the interests of small shareholders.

The company, which has burnt through about £125m in little more than a year, revealed last week that it hoped to raise £25.3m (net of expenses) from existing and new investors by issuing 2.65 billion shares at 1p each.

If the current shareholders all take up their full entitlement, they will be left owning just 19 per cent of Redstone. RAG is outraged with the terms and has urged other investors to reject the proposed cash call at the extraordinary general meeting scheduled for 20 July.

Ian Brown, the chief executive of Redstone, warned in a letter to RAG on Wednesday that if investors blocked the cash call, Redstone would be forced into receivership.

He said in the letter: "If the resolutions are not passed by sharesholders, the company will be left in a financial position where it will be unable to meet its commitments as they fall due. In such circumstances, the directors believe that the company will have to seek the appointment of an administrative receiver or pursue other insolvency procedures."

It is understood that the company has invited administrators to the meeting in case the resolution is rejected so that it can take immediate action.

The company needs the backing of at least three-quarters of its shareholders to pass the resolution.

The rebels, led by private investors Dennis Carmedy, Mark Taber and Gerald Cheyne, say they control more than 25 per cent of Redstone.

Shares in Redstone, which have lost 99 per cent of their value since early 2000, fell a further 0.5p to 2.25p.