Home International Cerberus buys troubled software company 'Torex'

Cerberus buys troubled software company 'Torex'

London: Torex Retail, the troubled software company, has agreed to be bought by Cerberus, the US private equity firm that owns Chrysler, in a deal that leaves some creditors and all shareholders empty handed. Most of the proceeds from the £204.4m sale will pay Torex's secured lenders, with about £12m being paid to financial and legal advisers on the transaction. The company added that unsecured creditors or shareholders of the holding company will not receive any proceeds from its administration, as senior debt plus deferred and transactional related liabilities at completion amount to about 212 mln stg. Torex's operations - which include software and contracts to supply services to customers - will pass to Cerberus, while the publicly-listed company, which will be little more than liabilities and a stock market listing, is going into administration with KPMG. Shareholders in Torex will also receive nothing, as UK insolvency law deems that secured lenders have priority over shareholders and unsecured bondholders. The sale is the latest twist in a drama that began in January when the company issued a profit warning eight days after announcing it had won new contracts. Neil Mitchell, its then chief executive, contacted the Serious Fraud Office to allege fraud, money laundering and insider trading at the company. Investigations by authorities are ongoing. "The consideration is insufficient to fully repay the sums due in respect of the holding company's secured bank loans, which include the additional 35 mln stg the board negotiated to provide time to conduct an orderly sale process," Steve Marshall, the chairman of the holding company, said in a statement. "The sale of the business was the only viable option available to the board and it was achieved despite breathtaking corporate governance and financial issues at PLC level, the scale and extent of which neither I nor my board colleagues have seen in corporate life," he added. The Cerberus offer values the Torex business at a 16.6 per cent premium to the market capitalisation of the PLC before its shares were suspended in January. The final deadline for offers for the Torex business was the end of May, with Cerberus and rival private equity firm Gores leading the bidding. Torex said in today's statement it had revenues of 246.2 mln stg in 2006 and operating profits of 4.2 mln stg against previous market expectations of 48 mln stg. The pretax loss for the year was 191.6 mln stg, including exceptional costs of 195.8 mln stg. In the four months to April 30, the company's operating loss was 12.7 mln stg before exceptional items.

 

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