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Carter & Carter seeks extra borrowings to avoid administration

In the face of mounting debts Carter & Carter is holding an extraordinary general meeting next month to ask shareholders to allow it to exceed its current borrowing limits and avoid administration.

The training company, which has an automotive division running apprenticeships for numerous car brands, said its “indebtedness going forward was likely to be higher than the performance of the business was able to support”.

Its debts have increased by £43m in the last 12 months, and now total £129m. The directors forecast this to increase further as extra working capital is needed, and predict it to peak at £175m by the end of July.

At present, the company’s articles restrict its borrowings from exceeding three times its capital and reserves. If it breaches this rule, it must repay the excessive debts, however the directors warn it would be unable to do so. They have warned that when it posts its financial results for the year to July 31 2007, Carter & Carter expects a substantial reduction in goodwill to lead to a corresponding drop in its reserves, which will result in a breach of the articles and lead the company into voluntary administration.

If the move is approved by shareholders, a major voluntary restructuring is expected to be announced in the next few weeks, depending on the successful outcome of talks with Carter & Carter’s lenders.

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