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HCL reveals £60m rescue fundraising plan

Healthcare Locums (HCL) is aiming to stave off insolvency with a £60 million refinancing package, the scandal-hit staffing firm has announced.

The company revealed details of the plan on the same day it announced financial results for the first time since the discovery of accounting irregularities in January.

The placing is intended to substantially reduce HCL’s debts, which stood at £125.6 million at the end of 2010. It will see Toscafund, the firm’s second-largest shareholder, offer £33.6 million for a 40% shareholding.

In addition, Ares Lux, the company’s mezzanine debt lender, has agreed to convert £22.4 million of debt into a 15% stake in HCL. Shareholders have been asked to approve the plan at an extraordinary general meeting on 12 September.

However, it is likely to face fierce opposition from a number of investors who have already expressed their concern at any debt-for-equity arrangements that will dilute their own shareholdings.

Commenting on the announced refinancing, HCL shareholder Permian Investment Partners told the Financial Times: “Toscafund and the company’s board have finally revealed their plans to acquire ownership of Healthcare Locums on the cheap – and it is every bit as cynical as we had feared.”  

However, HCL’s board warned that failure to approve the refinancing plan would likely result in insolvency and “in shareholders receiving no value for their current shareholdings”.

The board also said it had found “extremely poor levels of corporate governance” and a “lack of normal business policies and procedures and insufficient management of costs” during its investigations into the firm’s accounting irregularities.

This included listing software development costs on the firm’s balance sheet even though the computers in question were no longer being used by HCL. This resulted in an overstatement of net assets of £5.4 million.

The discovery of “serious accounting irregularities” in January led HCL to replace its entire board and dismiss the company’s founder and executive vice-chairman Kate Bleasdale. Trading in the firm’s shares was also suspended. HCL said it hoped the release of its results for 2010 and the refinancing deal would enable its trading on AIM to be resumed.

The results show the firm made a loss of £56.5 million last year on revenue of £157.2 million.

Posted on: 22/08/2011

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