The board of Midas Capital last week considered every available option to improve its financial position, according to Colin Rutherford, the firm’s executive chairman. Possibilities raised in crisis talks included a rights issue and selling off subsidiaries.
But the board decided against selling iimia Wealth Management and Miton Optimal, the businesses Midas acquired last year, and against holding a rights issue. Instead, its bank lender is to take 20% of the firm in a debt-for-equity swap after Midas asked for a borrowing agreement to be restructured.
Of the £36.5m owed to Bank of Scotland, £14m will be converted into preference shares and £12m into a new senior debt facility. The rest of the debt will be converted into ordinary shares worth 19.99% of the group, subject to shareholder approval. The move is expected to result in a more suitable capital structure for the business, which has been beset with financial troubles in recent months.
In January the firm’s share price plunged by 60% as it struggled with £30m of debt on its balance sheet after its merger with iimia.
“The idea at the moment is to completely restructure, so we will be settling down in the near future,” says Rutherford. “There was a bit too much debt in the company and the restructure has addressed that particular problem. The aim now is to build the business, especially the wealth management and corporate services arms, and get more of its funds on to platforms.”
Midas will also allocate 15% of its shares to create a management incentive scheme in a bid to keep key employees. This follows the departure last month of Daniel Lockyer, a fund manager from iimia.