Turnaround specialist Beia has provided a £400,000 interest-free loan to Merchant House Group as it waits for the FSA to approve a share deal to provide extra funding to the group.
Merchant, 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 statement to the stockmarket this morning, the group says the fundraising will allow the directors to focus on launching a private equity fund, which it expects will be completed “in the near future”. Merchant is also planning to launch a “corporate offering” for its IFA arm.
Merchant had planned to update on its financial position and the impact of its current share suspension, but now says its annual report will not published until the second half of August.
Last month the group put out a stock market announcement which said it had secured a £1.35m working capital loan from Beia Capital.
In a further update today, Merchant says it is in advanced discussions to secure subscriptions for the £1.35m non-convertible loan notes and that Beia Capital has agreed to subscribe for the balance not taken up.
Beia Capital will subscribe to the loan notes in two tranches: one of up to £675,000 on 15 August and another tranche of up to the same amount on 28 September. The secured five year loan notes will be transferrable and carry a coupon of 14 per cent a year payable twice a year.
Part of the funding injection was announced last month was to come from a separate entity, Beia Investment Partners, which has subscribed to a five-year convertible loan note providing Merchant with £250,000 before costs.
Merchant planned to issue shares to Beia Investment Partners worth 17.6 per cent of the firm to raise another £400,000. Beia Capital would also be issued with shares worth £34,666 to fund the deal.
However it has been announced today the planned £400,000 share issue has taken the form of an interest-free loan instead ahead of FSA approval.
Merchant says: “Further to the announcement on 26 June, the application for approval from the FSA for Beia Investment Partners’ £400,000 equity investment is in progress and the directors are unable to anticipate when a decision will be forthcoming.
“In the meantime therefore, Beia Investment Partners has provided a £400,000 unsecured, interest-free loan facility in addition to the £250,000 convertible loan notes already subscribed for.”
Merchant has also appointed Allenby Capital as its nominated adviser and broker, following the resignation of Cairn Financial Advisers in May.
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.