The firm’s attempts to secure a cash injection of £35m from its largest shareholder EZcorp, by getting it to underwrite a new shares issue, failed last night leaving the firm to discuss lending arrangements with its banks about how to sort out any potential breaching of banking covenants.
The firm has signed an agreement with its banks, giving it an extra month to satisfy borrowing conditions – extending its 30 September deadline to 30 October.
The rights issue hasn’t been completely chucked out, but Albermarle said it was now focusing on ‘constructive discussions with the banks.’ Its net debt currently stands at around £51m.
The group’s share price had already fallen by 40% yesterday to 74.5p when the company announced it would be seeking the emergency injection of capital.
‘Unfortunately, the company has not been able to conclude these negotiations to the satisfaction of the board,’ it said in relation to the talks with Texas-based EZcorp.
The group, which currently has 230 outlets in the UK, said last week it would have to slash costs, its 33 gold-buying ‘pop-up’ stores a victim of the money saving drive.
The price of gold has dropped by a third since 2011, falling by 30% in the nine months leading to June, putting Albermarle in a perilous financial position. The firm started buying gold from the public back in 2009, in addition to lending money against valuables like jewellery but its gold buying operations are no longer profitable, thanks to fall.
Its former chief executive Barry Stevenson was forced to step down in April following a profit warning and incoming chief Chris Gillespie, a former Provident Financial director, is due to join next week. Let’s hope he’s up for a challenge.