POWER Corporation's results are now three weeks overdue. The reason? As usual, all the parties associated with the crucial financial restructuring remain tight lipped. Informed sources, however, are saying that some hitches have developed which, if not sorted out, might unravel the deal agreed with British investor, Mr John Beckwith.
The last results received by Power's shareholders were for the six months to the end of September, 1994. These are now 18 months out of date.
The company has held back the results to coincide with the financial restructuring and had set the end of last month as the target date. It would be easy to sympathise with that policy but, equally, shareholders should not be kept in the dark for so long, particularly as the shares have been suspended for more than six months.
Heads of agreement had been signed with the syndicate of banks which are owed £190 million. Under that deal, there would be an injection of around £20 million and Mr Beckwith, together with institutional investors, would end up controlling the revamped Power.
Mr Beckwith who, with his brother Peter, sold British property group, London & Edinburgh Trust, in 1990 for £491 million sterling, targeted Power because he wants to get a share quotation for his privately owned commercial property company, Portfolio.
It appears that a new valuation of the US properties by advisers to Mr Beckwith downgraded the values and he is now trying to cut a better deal. Some 85 per cent of Power's property portfolio is in the US, so a changed perception of US values would have an important influence on the value of the complete portfolio.
Retail property values in the US started to fall in the third quarter of 1995. Property experts reckon values have fallen by between 15 per cent and 20 per cent in the past nine months. The biggest property, and most problematic, is the San Francisco Shopping Centre which may have a negative equity value.
The syndicate of 12 banks, which is owed the £190 million, is led by Irish Intercontinental. Some £90 million of the bank' debt is secured against individual properties, so naturally this does not form part of the restructuring. Under the heads of agreement, the unsecured creditor banks, which are owed around £100 million, agreed to a write down of some 50 per cent. To compensate, they can convert a nominal amount of the debt into new Power shares. In this way, the banks would benefit from any upside potential.
The secured debt has a solid asset backing and that will not be changed. The banks have further room to manoeuvre on the unsecured debt. But they could well take the view that even without an investor, Power could be allowed to tick away as it his in a form of quasi receivership. Also, its out goings are minimal.
However, that would hardly be in the best interests of the shareholders who have already lost heavily with the shares down to a presuspension price of 1.5p, having being as high as 215p in 1990. The company has already breached the Stock Exchange rule which requires the issue of an annual report within six months of the end of a trading period. And the shares were suspended pending publication of that report.
The Irish Stock Exchange will not allow the shares to remain in suspension indefinitely. So they face the prospect of being delisted, unless shareholders are given up to date information on the financial state of their company, and soon.
