Equable Properties, the AIM –listed company run by veteran property entrepreneur Desmond Bloom, has secured a corporate deal with an Irish developer but revealed that it has breached banking covenants on the debt securing a portfolio of pubs.
Equable, which was listed on AIM by Bloom in March 2007, is to be taken control of by Peter McCann, who owns Kelford Estates. The deal, announced today, will see Equable buy 37 empty apartments, three shops and an office building, all in Bristol, from McCann for £4.5m in shares.
McCann will end up with 77% of the shares of Equable. Equable’s other large shareholders will see their holdings hugely diluted. They include Ukrainian businessman Igor Franchuk, who has 33%, PropInvest’s Glenn Maud with 15.1% and The Bervies Limited with 9.2%. Bloom himself has a 6.85% stake in the company, whose market capitalisation is less than £1m.
The reverse takeover will result in Equable having £14.5m of properties and £10m of debt. In conjunction with the deal, Equable is aiming to raise £1.5m of new equity from a placing of new shares.
Bloom will remain chief executive of Equable and McCann will join the board as an executive director. ‘I think we will work well together,’ said Bloom.
He aims to sell the 37 vacant apartments for a total of £6.5m. ‘This will give us £3.5m of extra cash,’ he said.
Worse news, however, is that Equable has breached banking covenants on a mortgage taken out with HSBC last year to finance the purchase of 10 pubs. Equable bought the pubs from a company called The Bervies for £4.6m in cash and shares at an initial yield of 8%. ‘The pubs proved to be not a good buy,’ said Bloom. ‘They are working men’s clubs and the smoking ban has had a big effect.
‘The pubs are unable to pay the full rent, so the income covenant has fallen below the ratio and we are in technical breach. However, we have enough cash for six months. It is not a serious breach in my view and all the indications are that HSBC will waive the covenant.’