With UKP215m – UKP185m after tax credits – to be written off on non-existent ISC Technologies Ltd contracts on three continents – the countries involved are thought to be Pakistan, China and Nigeria, the fraud alleged to have been committed against Ferranti International Signal Plc are every bit as bad as expected. The market will have its say today when trading in the shares, which were suspended at 73.5 pence, is due to resume, and is likely to dump them firmly in the bargain basement penny stock basket unless there is a clear sign of the rescue package that will have to be negotiated – the 40 pence widely talked about may be optimistic. Ferranti will not pay dividends either on its ordinary or its preference shares until a recapitalisation of some kind has been agreed – and that means a lot more than simply raising the UKP100m from planned asset sales, negotiations on two of which are under way. The company is looking for an injection of UKP150m of new capital on top of the UKP100m from asset sales, and outright acquisition of the business has to be the most likely outcome – it is the first option mentioned in chairman Sir Derek Alun-Jones’ letter to shareholders. The second option is a rights issue – but it is hard to see such a move succeeding without a large industrial group participating – STC Plc is the current favourite in the British camp although British Aerospace Plc looks a better bet, while Daimler-Benz AG and Siemens AG of West Germany, Matra SA of France and a string of US companies have been mentioned. And the third option is for just such a cash injection from a third party taking a stake. Hill Samuel is claiming interest from institutions speaking for 40% of the shares for its plan to hive off Ferranti’s defence interests and combine them with those of Thorn EMI Plc and perhaps Racal Electronics Plc. Time is short, because the firm’s bridging finance from its banks has to be renegotiated this month.
