McDonnell Information Systems (MDIS) has introduced an emergency refinancing plan to save itself from insolvency.
The scheme, which involves the placing of 260 million shares and the open offer of 104.8 million shares at 26 pence, has now received shareholder approval. The move is targeted to raise #24.3 million for the ailing supplier.
The proceeds from the six-for-seven share offer will be used to pay off national insurance and tax arrears amounting to #9.5 million and current liabilities of almost #5 million.
Without the fund raising activities, chairman Ian Hay Davision said the firm would ?not have sufficient working capital...and will therefore be unable to continue trading?.
MDIS also hopes to save money by renegotiating the contract on its headquarters in Hemel Hempstead, Hertfordshire. The previous management had sold the property for #25 million and leased it back under onerous terms.
MDIS intends to use its option to buy back the building for #25 million, so that is does not have to pay #3.8 million - twice the market rate - in rent. This should save it #2 million a year.
It is also introducing a restructuring package that, it hopes, will save #10 million a year. This will involve the loss of at least 200 jobs and mean the end to perks such as company cars for the UK?s 1,200 employees.
By cancelling its share premium account, the firm hopes to give itself enough leeway to start paying dividends again.
MDIS? shares began trading again on Friday, after suspension three weeks ago at 23 1/2 pence. They reopened at 31 pence, far below the company?s 1994 flotation value of 260 pence.
At the same time, the company announced year end pre-tax losses of #49.5 million, after exceptional charges of #21.5 million, compared with #39.4 million in losses after charges of #23.2 million in the year ago period. Turnover fell to #117 million from #146.8 million last year.
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