Creditors set to take control of Connaught

Updated: 16:16 EST, 8 August 2010

Stricken maintenance group Connaught could be forced to hand over the keys of the business to its banks by the end of the month, sources have said.

The social housing specialist is locked in negotiations with its creditors over a long-term financing deal after delivering a rash of profits alerts over the Summer.

Chairman Sir Roy Gardner wants to put in place a long-term financing deal ‘as soon as possible’. 

But with a rights issue looking impossible to execute, a debt-for-equity swap is now the most likely option for Connaught, City sources told the Mail.

This dire outcome would all but wipe out existing shareholders, who have seen the value of their holdings plunge by 90pc since the firm warned in June that public-spending cuts would decimate profits.

Since then Connaught has delivered a steady stream of ever grimmer trading news, shown its finance director the door and launched a full-blown inquiry into its
accountancy policies.

The crisis gripping the company has seen its suppliers begin to demand up-front payments, while Barclays sold off £19m of loans to Connaught for just 37p in the pound.

Connaught, whose market value plunged to just £20m after warning that it would make a ‘ material loss’ in the year to August, owes £200m.

A £15m emergency lifeline from its creditors runs out on August 31, which has now become the deadline for securing a deal to safeguard the company’s future.