Turnaround specialist injects up to £2m in Merchant House
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Merchant House Group has overhauled its senior management and announced a funding injection of up to £2m led by turnaround investment firm Beia.
Merchant House Group has overhauled its senior management and announced a funding injection of up to £2m led by turnaround investment firm Beia.
The group, which includes structured product arm Merchant Capital and IFA arm Merchant House Financial Services, has had its shares suspended on Aim since mid-April pending the results of a financial review.
In a stock market announcement, the firm says it has secured a £1.35m working capital loan from turnaround specialist Beia Capital Limited.
A separate entity, Beia Investment Partners, has subscribed to a five-year convertible loan note providing Merchant with £250,000 before costs.
Subject to FSA approval, Merchant will issue shares to Beia Investment Partners worth 17.6% of the firm to raise another £400,000. Merchant House is also issuing shares to Beia Capital worth £34,666 to fund the deal.
“The company has expanded very quickly on a thin capital base during a challenging period”
James Keane
As part of the funding move, Beia Capital founder and sole director James Keane has been appointed managing director of Merchant House and Beia Investment Partners partner Stephen Drew becomes non-executive deputy chairman.
Christopher Day remains chief executive and James Holmes remains chairman.
The firm says it will give an update on its financial position and the effect of the current share suspension in its results expected next month.
Keane says: “The company has expanded very quickly on a thin capital base during a challenging period. We believe that there is great value in the company’s core business divisions and we are pleased to provide financing to help drive future revenue growth and shareholder value.” (article continues below)
Merchant Capital custodian Pritchard Stockbrokers was suspended by the FSA from regulated activities in February.
In March, all £350m of clients’ non-cash assets were transferred to new custodian Reyker Securities but the regulator froze cash assets held by Pritchard. Mazars, the administrator of Pritchard, estimates a £3.4m shortfall in cash assets.
In March, Merchant House Group told Fundweb.co.uk sister title Money Marketing it was not aware of a £250,000 unsecured loan to Pritchard which is listed in Pritchard’s 2010-11 accounts.
Shares were originally suspended in March after the board became aware that 14% of the firm’s enlarged share capital had been issued without being announced or admitted to trading on Aim. The shares were restored at the start of April but suspended again on April 20.
Merchant House FS, an authorised representative of Tenet, has around 90 advisers. Glasgow Rangers owner Craig Whyte was Pritchard company secretary and is director of Liberty Capital, a British Virgin Islands firm which before today’s announcement owned 10.8% of Merchant House Group.
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