As a hybrid British-American company – it made its initial share flotation in the US and got a London listing only much later, Rodime Plc and its financial advisors have come up with a hybrid reconstruction proposal that is very similar to the kind of reorganisation plan presented to the US bankruptcy court by a company trading under Chapter XI bankruptcy protection, but without Rodime having had to enter bankruptcy proceedings or appoint a receiver. The bad news is that existing shareholders will find their holdings diluted to just 5% of the company which may well lead to trouble among US investors, who will not get a crack at the deeply discounted rights issue that is at the heart of the package – any rights accruing to holders of Rodime American Depository Receipts will be sold in the market and the proceeds distributed to them. Despite that, since Rodime works in dollars, all the sums to be raised are denominated in dollars, despite the fact that it will all be British money. The rights issue – 17 shares for each one held, at sevenpence a share, against the 45 pence at which the shares closed on Friday, will raise $13.4m for the company (and even shareholders who fear they may be putting good money after bad should go for it because the shares are very unlikely to fall as low as 7p following the reconstruction), and as well as irrevocable acceptances for 23.7% of the new shares, Rodime has won commitments from the Bank of Scotland and Investors In Industry Plc, 3i, to underwrite the issue and buy any shares not taken up. In addition, the Bank of Scotland will put up a $6m subordinated secured loan repayable in 1994, buy a $4m issue of 9% cumulative redeemable preference shares repayable from 1992, and a $20m revolving credit facility at 1% over the London Inter-Bank Offer Rate – that’s what Libor apparently stands for these days, although the O used to be Overnight. In addition, trade creditors have been persuaded to convert debts of $13.8m half the total the company owes to its suppliers – into loans, $6.2m to be repaid within a year and $7.6m by 1994. After the restructuring, 3i will hold 25% of the enlarged share capital, Bank of Scotland 29.9%. To encourage the new management, the executive directors of Rodime will subscribe for 6.25m new shares at an even deeper discount than outside holders – just 5 pence a share, and they will also be granted share options tied to future performance, which if exercised in full would give them 13% of the enlarged equity at September 30 1992. There is one other piece of bad news from the Glenrothes, Fife company, which has high hopes that its 100Mb and 200Mb 3.5 disks will power it to recovery: it made a net loss for the three months to March of $21.5m, after restructuring charges of $12m, on turnover of $21.1m – which is actually quite high for one quarter from Rodime. Shareholders are to vote on the plan on July 10.
