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December 4, 2008

Bank consortium rescues New Star

by Gill Montia

Story link: Bank consortium rescues New Star

New Star is being rescued by a consortium of banks that will take a 75% stake in the fund management firm.

Lloyds TSB, HBOS, HSBC, Royal Bank of Scotland and National Australia Bank are proposing a £240 million debt for equity swap in a move that will involve the firm delisting from the stock exchange.

Shareholders, who have so far seen the value of the investment firm’s stock fall 98% over the past 12 months, will vote on the matter in mid-January and the transactions could be completed by the end of the month.

New Star was established by John Duffield in 2001 and in recent months concerns about its level of debt have been mounting.

The firm’s funds under management had fallen to £13.9 billion at the end of November, having lost almost £1 billion a month since the end of June.

Mr Duffield has conceded that in the current market conditions the proposed rescue by the banking syndicate is the only option that can ensure the stability of the business.

According to a report in The Times, the banks will receive annual interest at 10% above Libor on their preference shares.

 

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