Nicholas Pettifer
Staff writer
With credit widely unavailable and pre-crunch bonds up for renewal, many companies in the UK need cash. But institutional investors are steadfastly demanding levels of protection that could endanger the solvency of some companies.
The Association of British Insurers (ABI) guidelines on non-pre-emptive issues for cash epitomise this. The ABI follows Pre-emption Group, limiting cash placings to 5% per annum. The ABI is also beginning to frown on cash-box structures that seek to raise further funds. This is tying the hands of some more conservative companies into special resolutions to get shareholder approval, delaying the cash. In the future it may also force companies into questionable cash boxes or risky, expensive and time-consuming rights issues.
There is growing opinion in the legal community that this percentage should be increased to allow companies more flexibility in difficult market conditions; 10% is being touted as a sensible figure.