Redstone to reveal funding plans, but fears spread over cash prospects

Redstone Telecom, which provides services to small and medium-sized business customers, is expected to unveil its funding plans early next week, despite increasing market speculation that it might not pull through its financial troubles.

The loss-making telecoms provider has come under intense pressure to outline how it will raise money to stay in business. Fears it was running out of cash have caused its shares to slide dramatically.

Last night, Redstone stock closed up half a penny at 6.75p, having traded as high as almost £9.50 at the height of the internet boom last year.

Sources still insisted last night that the company was continuing talks with its advisers over both a deeply discounted rights issue and a share placing to raise the cash. It is thought that the company is looking for about £20m. Speculation has been rife that the shares have fallen so far that the company could find it impossible to gain emergency refinancing.

On Monday, Redstone confirmed that it was "seeking an increase" in its working capital and said it was in discussions with "a number of providers of both debt and equity". It said it planned to make an announcement by the end of next week, alongside results from the year ended 31 March.

The move followed the resignation last month of the company's finance director, Alan Harrold, and the departures of a other key executives in March. They included John Karrington, non-executive chairman; Glyn Thomas, chief operating officer; and Bob Cushing, group strategy and business development director.

Redstone is thought to have spent almost all of £125m raised via a rights issue last year in trying to become the UK alternative network operator of choice.