London-based New Star Asset Management Group said a restructuring of its balance sheet that will result in £240 million (US$352 million) of its £260 million (US$382 million) of gross debt being converted into equity.
New Star said it has reached agreement in principle with its bank syndicate on the terms of a proposed capital reorganization that will leave it able to concentrate on its investment performance and client service as an unlisted company. It plans to de-list from the London Stock Exchange, where it floated three years ago, as part of the restructuring.
The£13.9 billion (US$20 billion) asset management shop said its board believes that the reporting requirements and public scrutiny that are part of being a listed company have served to magnify investors’ concerns about the firm’s debts.
The asset management shop said it currently has £30 million (US$44 million) in cash so that, if the restructuring were made effective today, it would be left with net cash. The firm’s bank syndicate will own 75% of New Star's fully diluted ordinary share capital and £94 million (US$138 million) out of £100 million (US$147 million) of new convertible redeemable preference shares to be issued by the firm. The banks in New Star's syndicate are HBOS, Lloyds, RBS, HSBC and National Australia Bank.
“The Board recognised the concerns of our clients regarding the level of our debt during these difficult times,” said John Duffield, chairman of New Star. “We have therefore taken this radical step to address these concerns completely and with one stroke. We are now free to focus all our attention on improving our investment performance.”