The facade of Atlantic Computers Plc has finally crumbled, and British & Commonwealth Holdings Plc has decided to cut its losses on the acquisition. The Stock Exchange has suspended the listing of British & Commonwealth’s securities, and its shares are suspended at 53p pending the postponed release of the company’s 1989 results and a reassessment of British & Commonwealth’s assets after the UKP550m write-off. For the period ended 31 December 1988, Atlantic reported an operating profit of UKP33.7m, but that figure plummeted to UKP6.7m for the six months to 30 June 1989. KPMG Peat Marwick McLintock was appointed to investigate Atlantic’s lease portfolio and accounts, and that investigation showed profits and net assets had been materially overstated by the company’s former accountants, Spicer Oppenheim. According to British & Commonwealth, prospects for future profits are substantially diminished. The investigation has yet to be concluded, but British & Commonwealth expects to report a substantial loss for Atlantic’s activities to December 31 1989, and it is probable that Atlantic has made no contribution to profit for two years, with underlying profit close to zero. Mark Wood was appointed as Atlantic’s managing director after the board of B&C decided that Atlantic could be more effectively controlled if the chief executive officer, David McCormick, was removed. Wood insists that the decision to appoint an administrator was one of a number of alternatives, including liquidation or disposal of assets. He compares it to Chapter 11 status – the US subsidiaries are expected to file for Chapter 11 protection shortly – while acknowledging that part or all of Atlantic’s UKP1,500m portfolio may be sold off, and a recommendation to liquidate is within the administrator’s powers. He says that the effect on users should be minimal, but given the two-tier structure of Flexlease, if liquidation were to take place, then many customers would be understandably worried about liability – if Atlantic were to disappear, users with Flexleases will be stuck with their original equipment with no-one from which to demand the promised upgrade. However, Wood insists that the management of Atlantic is responsible for leases, over 80% of which are based on Flexlease. He claims that there is no one reason for Atlantic’s predicament, but says that the management of B&C is concerned that the accounting conventions were not as conventional as would have been appropriate. Atlantic’s Canadian operation was closed down two weeks ago, and the US arm has just undergone a period of rationalisation. All of which bodes ill for the continued existence of Atlantic Computers in an industry where lessees must have some trust in the financial stability of the lessor.
