Troubled telecoms company Stentor has managed to get fresh funding of £5.5 million to continue its business. It will also be able to call on a further £3 million between April and June 1999.

Meanwhile, it has emerged that the company's finance director, Mr Cormac Lucy, has resigned and talks which could have seen Stentor rescued in a takeover by NTL Cabletel have been abandoned. Stentor desperately needed money because it has accumulated debts of £14 million.

One of Stentor's existing shareholders, Co-operation Benefit Fund Ltd has agreed to bail it out and the cash injected may be presaged by a management reshuffle. Under the complex deal, the company, a London-based investment fund, has agreed to underwrite the issue of 5.5 million ordinary shares of £1 each.

Stentor will also be able to call on the underwriter for a further three million preferred ordinary shares between April and June next. The net result of the deal will be that the investment fund could end up controlling Stentor, owning 95 per cent or more of the shares for an outlay of £8 million.

However, existing shareholders will be able to subscribe for the initial tranche of 5.5 million shares. Market sources say shareholders will be reluctant to do so, as the shares which reached 195p sterling at one stage, recently plummeted to as low as 6p.

Following yesterday's announcement the shares picked up slightly and closed at 20p.

The investment fund's currently shareholding is understood to be 10-15 per cent. The fund is one of two shareholders which loaned the company £6 million (£3 million each) in June, when cash flow became particularly critical. The company did not disclose the name of the second lender.

In a statement yesterday the directors said they expect to renegotiate the term of the two loans, together with accrued interest with the lenders. The new terms will provide for repayment in 2003 with an added interest penalty.

A spokesman for Stentor, which is quoted on the AIM in London, and whose shares have been suspended twice, said the company now felt it had sufficient funds to develop its business.

Industry sources said yesterday that it was likely there would be management changes at Stentor. When asked about this the spokesman would only say that the chief executive, Mr Patrick Cruise O'Brien would remain in his current role for the immediate future. Mr O'Brien, who is a son of Dr Conor Cruise O'Brien was not available for comment.

The deal will have to be approved by shareholders at an extraordinary general meeting. The directors of Stentor said the proposals were in the best interests of the company, its creditors and its shareholders.