De La Rue, the Bank of England’s sole banknote printer, is braced for showdown talks with its lenders after they called in advisers to launch a review of the business.
Sky News has learnt that De La Rue’s banking syndicate, which is led by HSBC and includes all of the UK’s biggest lenders, has appointed FTI Consulting to oversee crunch negotiations over its future borrowing arrangements.
The hiring of FTI comes after a torrid period for the company, which traces its roots back to 1820 and began printing banknotes 40 years later.
In November, it cast doubt on its survival prospects when it said there was “material uncertainty” over its future unless it could address its ballooning net debt position.
A turnaround plan is due to be unveiled by De La Rue’s new management team – led by chairman Kevin Loosemore and chief executive Clive Vacher – next month.
The company, which controversially lost its contract to print British passports to a Franco-Dutch rival from later this year, has a £275m credit facility due to expire towards the end of 2021.
In addition to HSBC, its lenders are Barclays, Bank of Ireland, Lloyds Banking Group, Royal Bank of Scotland and Santander UK.
The syndicate’s Independent Business Review is expected to be concluded within the next couple of months.
Analysts believe the company, which now has a market value of just £140m, will have little choice but to raise fresh equity during the course of this year.
At its last set of results, it reported a net debt position of about £170m – more than its equity is now worth.
Shares in De La Rue, which ended trading on Friday at 134.8p, have slumped by 68% during the last year.
Less than a decade ago, its board rejected a near-£1bn takeover bid from French rival Oberthur.
A string of profit warnings has forced the company to axe its dividend and overhaul virtually its entire board.
It has also sold its remaining passport-making business for just £42m, a fraction of its value if it had retained the UK passport deal.
To add to De La Rue’s woes, it disclosed last year a Serious Fraud Office probe into its banknote-printing operations in South Sudan.
De La Rue also found itself embroiled in a pay row in 2019 when nearly half of shareholders who voted opposed the company’s remuneration report over a £132,000 payment into the pension pot of former chief executive Martin Sutherland.
The figure equated to 30% of Mr Sutherland’s base salary, and – coupled with the company’s dire performance – placed De La Rue squarely in the sights of big City investors.
The activist shareholder Crystal Amber now owns close to 15% of the company, having increased its stake since the new management team was appointed.
A spokesman for De La Rue said: “As we have indicated previously, we will announce a turnaround plan during [the first quarter of 2020].
“Naturally, we would expect to have discussions with our lending banks and their advisors during this process as we move forward with our plans for the company.”
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