New Star Asset Management's creditors have taken control of 75% of the company in a debt-for-equity swap aimed at securing its future.
The banks, which lent the embattled fund manager £260m - HBOS, Lloyds, Royal Bank of Scotland, HSBC and National Australia Bank - will control both 75% of its ordinary share capital as well as a further £100m of convertible preference shares.
The group also revealed that its assets under management have shrunk to £13.9bn. As a result of the changes the company is to de-list.
The fund manager runs two large private investor property funds, the New Star UK Property Trust and the New Star International Property Fund, which last week suspended trading in its units because it was running out of cash to pay back redemptions.
New Star chairman John Duffield said: ‘The Board recognised the concerns of our clients regarding the level of our debt during these difficult times. We have therefore taken this radical step to address these concerns completely and with one stroke.
'We are now free to focus all our attention on improving our investment performance. Our existing share-based bonus scheme will be replaced by a new scheme to ensure that our key people are locked in.
‘The cost of this restructuring is regrettably a substantial dilution for ordinary shareholders, including me. However in current market conditions, we have to recognise that there is no other option to ensure the stability of the business.'