Stock in Stirling-based insulation manufacturer Superglass plummeted more than 60% on Wednesday after it warned administration was likely if shareholders failed to back a multi-million-pound financial restructure.
The troubled firm said it had reached agreement in principle to refinance the £12 million debt it owes to Clydesdale Bank a deal that includes a clause which would entitle the bank to 50% of Superglass’s annual post-tax profits.
If approved by investors, the agreement will see Superglass undertake a new shares placing aimed at raising a minimum of £12.2m.
The firm’s listing on the London Stock Exchange’s would be cancelled and shares would then trade on the alternative AIM market.
The company said it had received verbal commitments totalling more than £12.2m from both new institutional investors and certain existing shareholders in relation to the proposed placing.
Superglass yesterday said the deal would “transform the strength” of its balance sheet but if the placing was to be blocked by current shareholders, or should not go ahead for any other reason, then it warned the likely outcome was either administration or some other form of insolvency.
Under the terms of the deal, Clydesdale would be handed £6.5m of convertible shares which can be exchanged for ordinary stock after April 2015.
The holding would be equivalent to 10% of the Superglass’s business.
The bank would also receive £3m up front from the proceeds of the new share placing and a further £2.5m bank facility would be converted into a non-amortising loan with a five-year term.
In addition, Clydesdale will have the right to receive half of Superglass’s profits made after August next year.
Superglass’s board yesterday said they expected to complete the proposed refinancing shortly, assuming shareholder approval was forthcoming.
In its interim update yesterday, Superglass said it had completed the first phase of its Project Phoenix turnaround plan.
The company, one of Stirling’s major employers with about 170 staff on its books, said costs savings from the initiative and other efficiency projects were expected to shave £5m from the firm’s annual cost base by August 31 next year.
The board said once the savings were factored in it was expected Superglass would be cash generative, even at current depressed market volumes and prices.
In the six months to February 28, Superglass saw revenues drop by 20% to £13.7m and losses before tax and exceptionals doubled from £0.8m to £1.6m.
John Colley, non-executive chairman, said he believed there was a strong future for Superglass.
He said: “With the strong support of the Clydesdale Bank and investors we remain confident of completing this transformational refinancing which will provide Superglass with a considerably strengthened and sustainable long term capital structure.
“The proposed refinancing will leave the company very well placed to benefit from any resurgence in market volumes and the efficiencies from its recent capital investment programme.”