AgCert was set up last year to capitalise on the developing carbon markets. It produces greenhouse-gas emission reduction credits through animal waste that it then sells to governments and corporations to help them meet their Kyoto obligations.
AgCert had a rocky start to life as a public company, revising downwards its operating and financial projections just three months after listing on the AIM market.
Remedial measures have been taken and the chief executive replaced. Bullish carbon market fundamentals and restored faith in management have seen AgCert’s share price recover. It closed last week at 225p (330c), roughly where it was last August. It is one to consider for the high-risk investor.
Bidding fever
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Takeover speculation in the retail sector reached fever pitch last week with bids mooted for Marks & Spencer, Woolworths and WH Smith. Amid the hype Kesa, the retailer that owns Comet, quietly announced it had pulled a bond issue.
Kesa announced in January that it had brought in Barclays Capital, BNP Paribas and JP Morgan Cazenove to raise money in the bond market, with the proceeds used to refinance existing borrowings. Last Tuesday, Kesa admitted that market conditions had changed and claimed that investor sentiment had been hit by reports of a high-street downturn and a downbeat update from the British Retail Consortium.
There will, of course, still be deals and nobody should forget that following last year’s bumper Arcadia dividend, Philip Green is sitting on a £1 billion-plus war chest.
But Kesa’s experience certainly suggests that funding highly leveraged deals in the retail sector may not prove as easy as it once was.
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Eurotunnel cost
ONE of the stock market’s enduring mysteries is the gravity-defying performance of the Channel tunnel operator’s shares. Why anyone thinks the company’s equity is worth £357m — which is what the share price of 28p last week implies — is hard to know.
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The company’s management freely confesses that the business can support debt of about £3.3 billion. It has debt of £6.6 billion, and rising fast. So for it to have a future in its current form, there needs to be a financial restructuring that sees someone taking £3 billion-plus worth of pain. And in corporate restructurings like this, it is the shareholders who are always first in the firing line. Equity is risk capital, after all.
The share actually went up after the recent announcement from the company and a committee of its main creditors that they had reached an outline agreement on how the restructuring might proceed. Creditors have long made it clear that the only arrangement they want is a debt-for-equity swap — in other words, a huge dilution for the existing shareholders.
Jacques Gounon, Eurotunnel’s chief executive, must know the reality of the situation: the question is when he he will decide to come clean with shareholders.