THE restructuring deal which would have provided the ailing Power Corporation with a vital injections of capital, has collapsed, according to informed sources.
British investor Mr John Beckwith, chairman of the Premier Club, the fundraising arm of the Conservative Party, had agreed to the deal which would have led to a requotation of the Power shares, but this has now unravelled.
No one from Power would comment yesterday. However, the collapse, the second in less than two years (Malaysian public company, Insas Berhad, pulled out 18 months ago), has been linked to the negative publicity surrounding the club, which lays on dinners with senior ministers for members.
The Liberal Democrats had called for an inquiry into whether the party had paid VAT on corporate subscriptions to the club. The Conservative Central Office, however, countered by stressing that it complied fully with VAT laws".
Following attacks by British Opposition parties, Mr Beckwith denied that businesses, which can pay up to £100,000 sterling for membership, would have influence over policy. He said that you wouldn't get the ear of John Major. What you would be able to do is to meet him and listen to what he has got to say".
Mr Beckwith also said there was no connection between his chairmanship of the club and the invitation to his private property firm to tender for the £1.5 billion privatisation of the Ministry of Defence married quarters.
He is understood to have decided not to complete the deal with Power at this stage because the publicity might have had a negative impact on a refloating of Power. Mr Beckwith asked for a postponement for completion, but this was rejected by one of the syndicate of banks.
While the controversy over the Premier Club may well have provided the trigger for the collapse, there were rumblings that the deal was not progressing smoothly. A new valuation of Power's US properties by advisers to Mr Beckwith downgraded the values. This led to Mr Beckwith trying to cut a better deal.
Nevertheless, a number of people close to the negotiations were convinced that a successful deal could have been completed.
Under that deal there would have been an equity injection of around £20 million and Mr Beckwith, together with institutional investors, would have ended up with control of the revamped Power.
The syndicate of 12 banks, led by Irish Intercontinental Bank, is owed £190 million. Some £90 million of the debt is secured against individual properties and did not form part of the restructuring but the unsecured creditor banks which are owed some £100 million, agreed to a write down of some 50 per cent. To compensate them for that dilution, they were to have had conversion rights into new shares.
Power's room for manoeuvre is now very limited. Although accounts have not been produced for almost two years, a downward revaluation of its properties would push it into a negative net worth position. As it is not paying interest, it is already in a form of quasi receivership.
Power, which employs 26 people in Ireland owns just a dozen properties in Ireland (Powerscourt Townhouse Centre in Dublin is the main one), Britain and the US. The founder, Mr Robin Power, and his wife, Ms Michele Kavanagh, resigned in April 1995.
