Arnotts refinance deal will 'wipe out Boundary's shares'
Investment firm's ex-chairman warns 28pc stake to become worthless
Beleaguered financier Niall McFadden's Boundary Capital has warned it faces a virtual wipe-out on its 28pc stake in Arnotts as the iconic department store group finalises a major refinancing.
Anglo Irish Bank acquired 17pc of Arnotts at the same time as Boundary two-and-a-half-years ago, in a deal that valued the group at €144m. The remaining 55pc is under the control of group chairman Richard Nesbitt.
Boundary, where Mr McFadden remains a 45pc shareholder despite stepping down as chairman last year, said yesterday the level of debt owed by Arnotts' holding company "means that there is unlikely to be any material value" for the investment firm after the refinancing.
But sources cautioned against extrapolating the warning to other shareholders, as Boundary had almost €40m of borrowings against a stake that was effectively worth €14m as per Arnotts' accounts for the year to end of January 2009.
The equity value of the group had been written down to €50m at that stage. It will be some months before it is disclosed whether any further charges have been booked.
The Arnotts refinancing, which was agreed in principle late last week with Anglo and Ulster Bank, will see the group roll over a €260m-plus debt package, which was due to expire in April.
Under the agreement, which was under negotiation for six months, the group's debt will now fall due in instalments over the next three years.
Meanwhile, the two banks have provided a further €11m in working capital to Arnotts as it grapples with difficult trading conditions as consumers continue to tighten their purse strings. A source close to the company said it was "very happy with the terms of the refinancing". Although it is understood that while a debt-for-equity swap packaging was avoided this time, it may come up again, if further restructuring of borrowings is required.
Meanwhile, loss-making Boundary has been trying to refinance €38.6m of debt with Anglo since last summer. The facility is supported by personal guarantees from Mr McFadden. It emerged in court last year that he had moved to London as Anglo secured a judgment against him over unpaid loans and personal guarantees.
The financier struck the deal for Boundary and Anglo to take the massive Arnotts stake in 2007 -- at a time when Mr Nesbitt was forging ahead with a €1bn plan to redevelop a five-and-a-half acre site into a "retailing mecca" in Dublin's north inner city.
The so-called Northern Quarter, bordered by Henry Street, Middle Abbey Street, Liffey Street and O'Connell Street, has finally got the planning green light.
Arnotts chief executive David Riddiford conceded last month that construction, originally envisaged for late 2008, was unlikely to begin before 2011 -- though some property observers believe this may also prove to be ambitious.